United States Court of Appeals
for the
District of Columbia Circuit
TRANSCRIPT OF
RECORD
7Wr»
1 > a ft A :h
INDEX
PAGE
Jurisdictional Statement . 1
Statutes and Orders Involved- 2
Statement of the Case; the Intervenor’s Charge of
Champerty and Maintenance . 6
Statement of Points .. 11
Outline of Argument . 12
Point I
The Present Suit Was Instigated and Carried on
by the Large Dairies. Plaintiffs Do Not Repre-
sent Producers As a Class But Handlers and the
Court Below Should Have Denied Relief. 14
Point II
Congress Has Authorized the Secretary of Agri¬
culture, Upon Proper Findings, Based on Sub¬
stantial Evidence Received at Hearings to Pro¬
vide for Payments to Producer-owned and Con¬
trolled Co-operative Associations for Services
Rendered to Effectuate the Purposes of the Act
and of a Marketing Order Issued Thereunder.
The District Court Erred in Its Contrary Holding 19
Point HI
The Court Below Erroneously Concluded That
the Secretary Exceeded His Statutory Authority
in Inserting in the Order the Provision for Deduc¬
tions for Payment to Co-operative Associations_ 28
Point IV
The Secretary’s Order Was an Administrative
Interpretation of His Authority Which Is En-
l*Jl 1 l 1 TTT • V l A i
titled to Great Weight. 34
Point V
Subsequent Legislative History Supports the
Validity of the Co-operative Payment Provision
Involved Here . 36
Appendix I Extract from Bulletin DM-6, Dept, of
Agriculture—Payments Out of Pool.... 43
11
INDEX (Continued)
PAGE
Appendix II Extract from Compilation, Dept, of
Agriculture . 44
Appendix III Statement of E. W. Gaumnitz . 46
Appendix IV Extract from Report of Committee on
Agriculture . 48
Table of Cases
PAGE
Amer. Power & Light Co. v. Sec., 329 U. S. 90, 112 .... 23
Armour Co. v. Wantock, 323 U. S. 126, 129 . 20
Bailey Farm Dairy Co. v. Anderson, 157 F. 2d 87. 31
Baldwin v. Seelig, 294 U. S. 511 .. 29
Bickford’s Inc. v. Federal Reserve Bank, 5 Fed. Sup.
875, 877 .-. 18
Billings v. Truesdell, 321 U. S. 542, 552 . 35
Birnbaum v. U. S., 107 F. 2d 885, 887 - 40
Burford v. Sun Oil Co., 319 U. S. 315, 318-19. 16
Burns v. Scott, 117 U. S. 528, 591 . 15
Caha v. U. S., 152 U. S. 211, 221_ 28, 34
Clark v. Chase Natl. Bank, 45 Fed. Sup. 820, 823 _ 17,18
Cudahy Packing Co. v. Holland, 315 U. S. 357, 366 _ 27
Dickey v. Raisin Proration Zone 24 Cal. 2d 796 . 20
Dunwoody v. U. S., 22 Ct. Cl. 269, 288 . 20
Fleming v. Mohawk Co., 331 U. S. Ill, 116. 35
Frank Bros. v. NLRB, 321 U. S. 702, 704 . 21
Fox v. Standard Oil Co., 294 U. S. 87, 96 .. 27
Gemsco v. Walling, 324 U. S. 244, 255 _ 21, 23, 30, 35
General Investment Co. v. Bethlehem Steel Co., 248
Fed. 303 ... 20
INDEX (Continued)
PAGE
Ginsberg & Sons v. Popkin, 285 U. S. 244 - 24
Gray v. Powell, 314 U. S. 402, 411- 23, 35
Greathouse v. Dern, 289 U. S. 352 --- 16
Great Northern Ry. v. U. S., 315 U. S. 262, 272 — 24, 36
Green Valley v. U. S., 108 F. 2d 342 - 31
Harrison v. Northern Trust Co., 317 U. S. 476, 479 — 27
Heiskell v. Mozie, 65 App. D. Ci 255, 257, 82 Fed. 2d
861, 863 ____ 14
Hoffman v. Palmer, 129 F. 2d 976, 985 - 40
H. B. Hood & Sons v. DuMond, 69 S. Ct. 657, 666 — 28
Illinois Gas Co. v. Central Illinois Co., 314 U. S. 498 .. 35
Jamison Coal Co. v. Goltra, 143 F. 2d 889, 895 - 15
Johnson v. Van Wyck, 4 App. D. C. 294, 323-4 -- 15
Kalamazoo Auto Sales Co. v. Travelers Ins. Co., 222
Michigan 74, 198 .-. 22
Liberty Warehouse v. Burley Co-operative, 276 U. S.
71, 92-93 ..15, 27
Lichter v. U. S., 334 U. S. 742, 785.21, 24
Lilly v. Grand Trunk Western Ry., 317 U. S. 481,
488 ...28, 34
Lord v. Veazie, 8 How. 251_ 18
Matter of Cregan, 275 N. T. 337 . 40
Meeker v. Straat, 38 Mo. A. 239, 243. 18
Merchants Exchange v. Mo., 248 U. S. 365, 366 . 40
Metropolitan R. Co. v. Moore, 121 U. S. 558, 572 . 40
Middleton v. Parker, 3 App. D. C. 149, 160 .. 20
Morton Salt Co. v. Suppiger, 314 U. S. 488, 492 _ 16
Nebbia v. New York, 291 U. S. 500 ........ 29
Nichols & Co. v. Sec. of Agriculture, 131 F. 2d 651, 658 20
IV
INDEX (Continued)
page
NLRB v. Hearst Publications, 322 U. S. Ill, 131. 21
NLRB v. Lorillard Co., 314 U. S. 512.- 22
Parker v. Brown, 317 U. S. 341, 354 . 40
Phelps Dodge v. NLRB, 313 U. S. 177. 21
Porter v. Murray, 156 F. 2d 781, 785 . 39
Securities & Exchange Comm. v. Joiner L. Corp., 320
U. S. 344, 357 . 24
Sioux Tribe v. U. S., 316 U. S. 317, 329 . 39
Southern S. S. Co. v. NLRB, 315 U. S. 31, 46. 21
Stark v. Wickard, 321 IT. S. 288.12,14,18, 31
Swayne & Hoyt v. U. S., 300 U. S. 297, 302 . 33
Thompson v. Consolidated Gas Co., 300 U. S. 55, 69..„ 23
Thorsch v. Miller, 5 F. 2d 118, 121. 28
Tigner v. Texas, 310 U. S. 141, 145 . 27
U. S. v. Amer. Truck Assoc., 310 U. S. 534, 542 . 24
U. S. v. Bush &• Co., 310 U. S. 317. 22
U. S. v. C. I. O., 325 U. S. 106,112. 24
U. S. v. Denver & Rio Grande R., 150 U. S. 1. 20
U. S. v. Kelly, 55 Fed. 2d 67, 70 . 23
F. S. v. Rock Roval, 307 U. S. 533, 575
. 19, 21, 27, 29, 34, 36, 37
U. S. v. United Machinery Co., 64 Fed. 138. 27
U. S. v. Von Clemm, 136 F. 2d 969, 970 . 23
Virginia Electric Co. v. NLRB, 319 U. S. 533, 539 . 35
Ward v. Alsup, 100 Tenn. 619, 739 . 18
Warehime v. Varney, 147 F. 2d 238 . 22
White v. Winchester C. C., 315 U. S. 32, 41. 35
Yakus v. U. S., 321 U. S. 414, 427 . 21
INDEX (Continued)
v
PAGE
Statutes Involved
Agricultural Marketing Agreement Act of 1937, 7
USC 601
Section 8c(l), issuance by Secretary. 12
Section 8c(5) Milk and Its Products; Terms and
Conditions of Orders. 2, 13, 24, 25, 29-34
Section 608c(7) Terms Common to All Orders
.2, 13, 19, 24, 25
Boston Marketing Order, 12 F. R. 4921 7 CFR 1947
Supp. 3
Section 904.0 Findings. 3
Section 904.9 Payments to Cooperative Associa¬
tions . 4
Section 904.9 Further Provisions. 4
Amendment of August 1, 1947 to Section
904.10(b)(1) . 5
Capper-Volstead Act, 7 U. S. C. 291.15, 25
Rules of Civil Procedure, Rule 23a . 17
NLRB Act, Tit. 29 U. S. C. 20
Commodity Exchange Act, 7 U. S. C. 20
Bituminous Coal Conservation Act, 15 U. S. C. 21
Tobacco Inspection Act, 7 U. S. C. 21
Agricultural Adjustment Act, 7 U. S. C. 21
Emergency Price Control Act, 50 U. S. C. 21
Fair Labor Standards Act, 29 U. S. C. 21
Miscellaneous
Moore’s Fed. Practice, 3419. 18
Words and Phrases, Yol. 20, Page 423 . 20
Gaumnitz, Statement . 37
In The
Ittitrii $tat?s (Eourt of A
MU
F T
Foe the District of Columbia Circuit
Nos. 10,365 and 10,366
Charles F. Brannan, Secretary of Agriculture,
Appellant,
and
Dairymen’s League Co-operative Association, Inc.,
Intervenor- Appellant,
v.
Delbert 0. Stark, et al,
Appellees.
On Appeal From the Judgment of the United States
District Court for the District of Columbia
BRIEF FOR INTERVENOR-APPELLANT
DAIRYMEN’S LEAGUE CO-OPERATIVE
ASSOCIATION, INC.
JURISDICTIONAL STATEMENT
The Dairymen’s League Cooperative Association Inc.
intervened as a party defendant in the Court below. It
filed its notice of appeal June 22, 1949, (App. 157). Its
appeal was, by order of this Court, consolidated for hear¬
ing with No. 10365. Jurisdiction of this Court is in¬
voked under Title 28, U. S. Code Section 1291 and 1294.
2
STATUTES AND ORDERS INVOLVED
The following are relevant sections of the Agricultural
Marketing Agreement Act of 1937 (7 U. S. C. 601 et seq .):
§608c. Orders Regulating Handling of Commodity.
(1) Issuance by Secretary.
Sec. Sc (1) The Secretary of Agriculture shall, subject
to the provisions of this section, issue, and from time to
time amend, orders applicable to processors, associations
of producers, and others engaged in the handling of any
agricultural commodity or product thereof specified in
subsection (2) of this section. Such orders shall regu¬
late, in the manner hereinafter in this section provided,
only such handling of such agricultural commodity, or
product thereof, as is in the current of interstate or for¬
eign commerce, or which directly burdens, obstructs, or
affects, interstate or foreign commerce in such commodity
or product thereof.
(5) Milk and Its Products; Terms and Conditions of
Orders.
(5) In the case of milk and its products, orders issued
pursuant to this section shall contain one or more of the
following terms and conditions, and (except as provided
in subsection (7) no others:
(The remainder of Sec. (5) deals with the classifica¬
tion and pricing of milk.)
Sec. 608c(7) 7 erms Common to All Orders.
(7) In the case of the agricultural commodities and the
products thereof specified in subsection (2) orders shall
contain one or more of the following terms and conditions:
(D) Incidental to, and not inconsistent with, the terms
and conditions specified in subsections (5), (6), and (7)
3
and necessary to effectuate the other provisions of such
order.
The following are relevant sections of the Boston milk
marketing order, as amended (12 F. R. 4921, 7 CFR, 1947
Supp., 904.0 et seq .):
The Order set out the findings of the Secretary as fol¬
lows :
Section 904.0. Findings. The Secretary finds, upon
the evidence introduced at the last above-mentioned
hearings, said findings being in addition to the findings
made upon the evidence introduced at the original
hearings on said order, and on amendments to said
order, and being in addition to the other findings
and determinations made prior to or at the time of
the original issuance of said order, and of amendments
thereto (which findings are hereby ratified and affirmed
save only as such findings are in conflict with the find¬
ings hereinafter set forth):
1. That the prices calculated to give milk produced
for sale in said marketing area a purchasing power
equivalent to the purchasing power of such milk, as
determined pursuant to section 2 and 8(e) of said
act, are not reasonable in view of the price of feeds,
the available supplies of fees, and other economic
conditions which affect the market supply and demand
for such milk, and that the minimum prices fixed in
this order, as amended, are such prices as will reflect
the aforesaid factors, insure a sufficient quantity of
pure and wholesome milk, and be in the public in¬
terest; * * •
3. That the provisions relating to the payments out
of the equalization pool to cooperative associations
performing certain marketing services are incidental
to, not inconsistent with, the other provisions of the
order, as amended, and necessary to effectuate the
other provisions of the order, as amended.
4. That all the remaining provisions of the order,
as amended, are necessary to effectuate the other pro¬
visions of the order, as amended;
That the issuance of the order, as amended, and all
of its terms and conditions will tend to effectuate the
declared policy of the act.
4
Sec. 904J). Payments to cooperative associations.
(a) Eligibility of cooperative associations. Upon ap¬
plication to the Secretary any cooperative association
duly organized under the laws of any State which he
determines, after appropriate inquiry or investigation,
to be conforming to the provisions of such laws and
of the Capper-Volstead Act, as amended, as to char¬
acter of organization, voting requirements, dividend
payments dealing in products of non-members; to be
operating as a responsible producer-controlled mar¬
keting association exercising full authority in the sale
of the milk of its members; to be systematically check¬
ing the weights and tests of milk delivered by its
members to plants other than those which may be
operated by itself; to guarantee payments to its pro¬
ducers; to be maintaining, either individually or in
collaboration with other qualified cooperative asso¬
ciations, a competent staff for dealing with market¬
ing problems and providing information to its mem¬
bers with whom close "working relationships are con¬
stantly maintained; to be collaborating with other sim¬
ilar associations in activities incident to the main¬
tenance and strengthening of collective bargaining by
producers and the operation of a plant of uniform
pricing of milk to handlers; and to be complying with
all provisions of this order applicable to such coopera¬
tive association, shall be entitled to receive payments
in the amount and under the conditions herein speci¬
fied from the date of qualification, as fixed by the
Secretary, until it has been found by the Secretary
after notice and opportunity for a hearing, that it has
failed to continue to meet any condition or to maintain
and exercise the authority or to perform any of the
functions required by this section for the receipt or
use of such payments.
Section 9043 of the Order further provides:
(1) Any such cooperative association shall receive
an amount computed at not more than the rate of 1 y 2
cents per hundred-weight of milk marketed by it on
behalf of its members in conformity with the provi¬
sion of this order, the value of which is determined
pursuant to Sec. 904.7(a), and with respect to which
a handler has made payments as required by Sec.
5
904.8(b)(3) and Sec. 904.10; Provided, That the
amount paid shall not exceed the amount which han¬
dlers are obligated to deduct from payments to mem¬
bers under subsection (e) hereof and are not used in
paying patronage dividends or other payments to
members with respect to milk delivered except in ful¬
filling the guarantee of payments to producers; and
that in cases where two or more associations partici¬
pate in the marketing of the same milk, payment
under this paragraph shall be available only to the
association which the individual producer has made
his exclusive agent in the marketing of such milk.
(2) Any such cooperative association shall receive
an amount computed at the rate of 5 cents per hun¬
dred-weight on Class I milk received from producers
at a plant operated under the exclusive control of
member producers, which is sold to proprietary han¬
dlers. This amount shall not be received on milk
sold to stores, to handlers, in which the cooperative
has any ownership, or to a handler with which the
cooperative has such sales arrangements that its milk
not sold as Class I milk to such handler is not avail¬
able for sale as Class I milk to other handlers.
Amendment dated August 1, 1947, to Section
904.10, as amended, August 1,1941, 7 CFR, 1947 Supp.
904.10:
Sec. 904.10(b)(1) Each qualified association shall
be entitled to payment at the rate of 1 cent per hun¬
dred weight on the milk which its producer members
deliver to the plant of a handler other than a qualified
association; except on milk delivered by a producer
who is also a member of another qualified association,
and on milk delivered to a handler who fails to make
applicable payments pursuant to §904.9 (b) (2) and
§904.11 within 10 days after the end of the month in
which he is required to do so. If the handler is re¬
quired by paragraph (e) of this section to make de¬
ductions from members of the association at a rate
lower than 1 cent per hundred weight, the payment
pursuant to this subparagraph shall be at such lower
rate.
(1) Each qualified association shall be entitled to
payment at the rate of 2 cents per hundred weight
on milk received from producers at a plant operated
by that association.
6
STATEMENT OF THE CASE
The Dairymen’s League Cooperative Association, Inc.,
which has intervened as a party defendant with the per¬
mission of the Court is a cooperative corporation which
acts as the marketing agent for many thousands of pro¬
ducers of milk in Massachusetts, New York, Vermont,
Connecticut, Pennsylvania and New Jersey. (App. 55)
The intervenor adopts the statement of the case con¬
tained in appellant’s brief. It should be emphasized that
appellees are non-members of any cooperative. However,
under the Secretary’s milk orders, non-member producers
receive the same price for their milk and thus reap
the advantages of the intervenor’s activities.
THE INTERVENOR’S CHARGE OF CHAMPERTY
AND MAINTENANCE:
The intervenor submitted the following additional de¬
fense :
The intervenor, by leave of the Court, amended its an¬
swer, Paragraph 13, by alleging the following:
“(13) Further answering the complaint, as
amended, this defendant alleges, upon information and
belief, that the plaintiffs herein are merely nominal
parties and that this action in reality has been brought
and is being prosecuted by and for the benefit of
certain handlers of milk in the Greater Boston milk
marketing area who have no legal standing to attack
the validity of the so-called ‘co-operative payment
provisions’ contained in Section 904.9 of Order No. 4
regulating the handling of milk in the Greater Boston
milk marketing area; that the attorneys for the plain¬
tiffs were chosen and paid by said handlers and all
expenses of this action have been paid by said han¬
dlers; that said handlers are using the names of the
plaintiffs herein as a subterfuge because of their legal
incapacity to maintain a cause of action.” (App.
141,466-467)
7
As to the above defense, the evidence shows that plain¬
tiffs below, non-members of any cooperative, were five
small producers of milk in the Boston area who sold their
product either to the Whiting Milk Company or H. P. Hood
and Sons, Inc., the two largest handlers of milk in the
Boston marketing area. (App. 255, 278, 300, 331, 265)
Appellees have never paid a dollar to defray attorneys
fees or expenses of the present litigation. (App. 262, 309,
348) Mr. Polikoff, plaintiffs original attorney, charged
$5,112.55 which was paid in its entirety by Hood, Whiting
and three other major handlers. (App. 450). Their later
representative, Ropes, Gray, Best, Coolidge and Rugg
charged, up to February 28, 1948, $17,751.74, prior to
the trial, which was paid by the Hood Dairy. (App. 450)
This firm is the regularly retained attorneys for the Hood
Dairy (App. 414, 433).
Plaintiff Stratton has died since the institution of the
suit (App. 350); plaintiff Stebbins has since joined a
qualified cooperative from which he receives benefits.
(App. 281). Plaintiffs have sued for themselves and for
the benefit of all other persons similarly situated. (R.
2). The answer of defendant (App. 48) traversed these
allegations, which were not admitted by the Intervenor.
(App. 52, amended answer. App. 141, 466-7). Although
the complaint alleges irreparable damage to plaintiffs
(Comp. 14, 15, App. 6), the reasons for their objections
to the deduction do not include financial loss as the result
of the deduction in question but are ideologic in character.
(App. 266-7). Thus Stark contended that the services ren¬
dered by the cooperatives did not justify them in asking
non-members to chip in and pay their expenses, (App. 332-
332, 355); that if the present deduction was valid, money
could be taken from the pool for a Christmas Club or
Community Welfare. (App. 332). Denton stated he did
not believe in equalization and saw no reason to divide
with his neighbors. (App. 329, 335-6). Walsh stated that
the producers wanted to go into his pay check and take
8
money out (App. 276-277) and anyhow he objected to the
equalization pool generally. (App. 275,276).
A reading of the depositions of the plaintiffs (App.
254-363) shows that none of them had much understanding
of the basis of the Secretary's finding in the Order as
to the services the cooperatives render to promote or¬
derly marketing and to maintain and enhance prices to
producers. (See App. 283,336,354-5).
The suit was instituted mainly through the activities
of Stark. Stark and Denton were present at producers’
relationship meetings sponsored by the Whiting Dairy at
which Whiting officials stated why the Whiting Dairy was
opposed to the cooperatives deduction in principal but
that it was up to the producers to initiate any move. The
company would render any assistance it could. (App.
331). A possible law* suit was discussed and the first at¬
torney to enter the case, a New York lawyer named
Polikoff, was suggested to Stark by the president of Whit¬
ing who later took Stark and Denton to call on the lawyer
in a Boston Hotel. (App. 322,337-9).
No understanding was had with the lawyer as to the
payment of his fees or court costs or the amount thereof.
(App. 261, 339-340). The plaintiffs never had any idea
of what the case might cost nor had they ever received
any bill. (App. 262, 272-274, 280, 307, 309, 313, 348).
However, they stated they expected to contribute some¬
thing themselves and later arranged with certain other
Whiting producers that one cent per hundredweight of
their milk should be deducted from their pay checks.
(App. 308). This was done for a short period in 1941,
the total amount collected being around $400 which is
still being held by Whiting. (App. 308, 309, 368). Stark
expected Whiting to contribute and Whiting was willing
to do this. (App. 348,361,368).
Stebbins and Walsh were Hood Dairy producers. (App.
255). Stark asked the former to go along to stop the de-
9
duction. (App. 278-9). Stebbins has since joined a co¬
operative. (App. 281).
Walsh was persuaded to enter the case by a field repre¬
sentative of the Hood Dairy who was looking for a New
York producer to get into the case. (App. 260). Walsh
expected to pay his share, (App. 261) although he had
no idea what it would be, (App. 262, 272-274) and could
not afford much. (R. 274). He understood the Hood
Dairy would help out. (App. 274).
Only Stark recalled meeting the first attorney. (App.
280, 338). Plaintiffs except Stark (App. 345) never heard
of the attorney who succeeded him, although the new at¬
torney received payments for legal services in 1941.
Stark heard nothing about the case from the time it went
to the Supreme Court in 1944 until the new attorney vis¬
ited him in 1948. (App. 361). At that time Stark him¬
self was out of the milk business as he had sold his herd
the previous April and in 1948 was employed in a grain
store. (App. 352). Stark re-entered the milk market in
September, 1948, with five cows. (App. 352).
As of the end of 1945, Stark’s deductions for co-opera¬
tive payments amounted to around $100. (App. 357).
Walsh’s deductions amounted to around six cents a day
(App. 267). Stebbins interest in the deduction for 1946,
1947 and 1948 at tvro cents a day w*ould amount to around
$210.00. (App. 287). Denton, from 1941 to 1948, had
deductions at stake of around $242. (App. 326). The
1947 amendment to Sec. 904 reduced the deduction to 1 %
cents a hundredweight. (This Brief p. 4). Prior to
the 1947 amendment the total deduction paid the coopera¬
tive was around $15,575.31 a month. (App. 89).
The principal handlers, particularly Hood, the largest
milk dealer in New England, had been opposed to the co¬
operative deduction on the ground that it gave coopera¬
tives a competitive advantage over the handlers. (App.
10
75, 35S, 369, 370, 395, 406, 428, 458). They admitted it
did not affect their cost of product. (App. 367). These
handlers attempted to defeat the deduction in public hear¬
ings (App. 371-2; 442 Public Hearing Record 745-758,
S24-S32, 789-S00). The president of the Hood Dairy stated
that his company was opposed to the cooperative deduc¬
tions from the pool and admitted his company had been
requested to contribute something. He stated that the
firm of Ropes, Gray, Best, Coolidge and Rugg, of record
as representing plaintiffs, were attorneys for his company
and that his company would like to see the cooperative
payment provision removed from the Order. (App. 428,
433,445, 449-450).
The Hood Dairy stated that the charges of the first at¬
torney for plaintiffs, Mr. Polikoff, for legal services from
1941 through July, 1943, amounted to $5,112.55, one-half
of which was paid by the Hood Dairy. (App. 450). The
charges of the Ropes, Gray, Best, Coolidge and Rugg firm
for the period from 1941 through February, 1948, for
legal services and disbursements amounted to $17,751.74,
which bill the Hood Dairy paid. (App. 450). Mr. Mer¬
rill, Accounting Chief of Hood’s Legal Division, stated
he believed Hood had been reimbursed in part for these
charges by other handlers. (App. 450).
This is alleged to be a class suit, plaintiffs alleging
that they represent six-thousand non-member producers
similarly situated. (App. 2). However, plaintiffs admitted
all producers shipping to Hood and Whiting were not
opposed to the cooperative deductions. (App. 256, 274).
Whiting’s representative agreed with them, (App. 370-
371), also plaintiff Walsh. (App. 256). In 1941 there
were 15,603 producers in the Boston area, 10,801 being
members of cooperatives and 4,802 being non-members.
(App. 296). Of the non-members, 843 voted in the refer¬
endum, of which number only 42 voted against the de¬
duction. (App. 296).
11
The cooperative deductions affect every producer in the
market regardless of whether he is a member or non¬
member of a cooperative.
The New York market has had an Order with similar
provisions since 1938 and Cincinnati and Dayton-Spring-
field have similar Orders. (App. 389, 410, 416, 3 F. R.
1943; 7 F. R. 9503; 10 F. R. 6162.)
STATEMENT OF POINTS
I
The present suit is champertous, having been instigated
and maintained by handlers, large dairies unable to sue
in their own right. This fact bears (a) upon whether
plaintiffs represent the class for which they purport to
sue (b) whether a court of equity should strike down an
important part of a governmental regulatory plan for
the benefit of undisclosed principals. (See paragraph 13,
Intervenor’s Amended Answer, App. 141, 466-467).
n
The deduction, i.e. sums paid to cooperatives for mar¬
ket-wide services, was incidental to and not inconsistent
with the terms and conditions specified in Section 608c
(5), (6), (7) of the Act and, as found by the Secretary,
was necessary to effectuate the other provisions of his
Order.
i
m
Section 608c (7) of the Agricultural Marketing Agree¬
ment Act of 1937, as amended, (U. S. C. 601 et seq.) au¬
thorizes the deduction.
IV
The Secretary’s Order was an administrative determi¬
nation of his powers and a construction of the Act en¬
titled to great weight.
12
V
Subsequent legislative history supports the validity of
the deduction.
OUTLINE OF ARGUMENT
I
The plaintiffs, non-members of any cooperative, purport
to bring suit “for themselves and for the benefit of all
other persons similarly situated.” (App. 2). The inter-
venor, by amendment to paragraph 13 of its Answer,
(App. 141) contended that plaintiffs were merely nominal
parties and that in reality the suit was brought and was
being prosecuted for certain large dairies, handlers of
milk in the Boston market who under Stark v. Wickard
321 TJ. S. 288 had no legal standing to attack the coopera¬
tive payment provision of the Order; that the attorneys
for plaintiffs were chosen and paid by these handlers,
who used the names of plaintiffs as a subterfuge because
of their own legal incapacity to maintain the suit. The
evidence shows that the first suggestion of a law suit came
from the Whiting Dairy who procured the first attorney
for plaintiffs, whose fee of $5,112.55 was entirely paid by
Hood, Whiting and three other major handlers. Plaintiffs
later representative, Ropes, Gray, Best, Coolidge and
Rugg had been paid, up to February 28, 1948, $17,751.74.
Plaintiffs have paid absolutely nothing by way of fees or
expenses.
The intervenor-appellant claims that the suit is thus
champertous in character. Even assuming champerty or
maintenance of a suitor does not destroy his cause of
action as such , the fact should be considered by the Court
(a) in respect of whether the suit is a true class suit (b)
in respect of whether a court of equity should under these
circumstances attempt to sustain a so-called private right
of a non-member producer at the expense of a large num-
13
ber of member and non-member producers who are not
before the Court. If the suit is not in truth a class suit
then, even if the Court below was right, its judgment
would, at most, be limited to these particular plaintiffs.
n
Congress has authorized the Secretary of Agriculture,
upon proper findings, based on substantial evidence re¬
ceived at hearings, to provide for payments to producer-
owned and controlled cooperative associations for services
rendered to effectuate the purposes of the Act and of a
marketing Order issued thereunder. The District Court
erred in its contrary holding. The deduction is inciden¬
tal to, and not inconsistent with, the terms and conditions
specified in Section 608c(5), (6), (7) and is necessary to
effectuate the other provisions of the Order. “ Necessary ? ’
does not mean “indispensable, essential or vital.” The
Court below was in error in construing “incidental” and
“necessary’’ in a purely abstract manner and apart from
the object of the provision. Further, the Court below
ignored the specific findings of fact by the Secretary that
such provision was incidental and necessary.
m
The Court below was in error in holding that the Statute
did not expressly authorize such deductions. Section
608c(5) in providing that milk orders “shall contain one
or more of the following terms and conditions . . . and
no others ’ ’ was qualified by the provisions of Section 608c
(7) dealing with “Terms Common to All Orders,” Sub¬
section (D) of which authorizes provisions “incidental to
. . . and necessary to effectuate the other provisions of
such order.”
IV
The Secretary’s Order was an administrative interpreta¬
tion of his authority which is entitled to great weight ir-
14
respective of the length of time his ruling has been in ef¬
fect. Such a provision was inserted into the New York
Order in 1937, in the Boston Order in 1941, in the Cincin¬
nati Order in 1944 and in the Dayton-Springfield Order in
1945. Lapse of time is not the true test but expert knowl¬
edge of the problems involved.
V
Subsequent legislative history supports the validity of
the cooperative payment provision. The Gillette bill in
1940 shows a conclusive Congressional ratification of the
provision.
Point I
The Present Suit Was Instigated and Carried On By the
Large Dairies. Plaintiffs Do Not Represent Produ¬
cers As a Class But Handlers and the Court Below
Should Have Denied Relief.
As the present suit asks for equitable relief, this Court
can “look through the shadow to the substance” (Heiskell
v. Mozie, 65 App. D. C. 255, 257; 82 F. (2) 861, 863) as to
the real party in interest. We think it fairly appears
from the recital of facts herein (this brief pp. 6-11),
that the present suit was instigated, or at least promoted,
by the Hood and Whiting dairies, who under Stark v.
Wickard, 321 U. S. 288, have no standing to sue in their
own right. Plaintiffs’ attorneys, who are also attorneys
for the Hood dairy (App. 414, 433), the largest dis¬
tributor in New England (App. 255, 265, 300, 331), ad¬
mitted below in their brief on the Motion to Dismiss, that
the Hood and Whiting dairies are pecuniarily interested
in the result of the present case and the record here shows
this. (App. 331, 35S, 369-370, 395, 406, 428, 458). The
record shows they have already paid one attorney $5,112.55
and the Ropes, Gray firm $17,751.74 to carry it on.
(App. 450) As against this, Plaintiffs have so far paid
not a single dollar. (App. 262, 272-274, 280, 307, 309, 313,
15
348) Hood and Whiting’s interest is understandable: cut¬
ting off the co-operative’s funds will destroy its sinews
of war, restrict its functions and services and by causing
direct and higher contributions from members, cause irri¬
tation and friction, with ultimate demoralization as the
end-result. Yet Congressional policy is strongly in favor
of co-operatives. (Capper-Volstead Act, 7 U. S. C. 291;
Liberty Warehouse v. Burley Co-operative, 276 U. S. 71,
92-93). (See App. 85-87) But in addition to these in¬
admissible objectives, which we think peep through the
present record, the large dairies have the claim that the
“deduct” gives the co-operatives a competitive advantage.
(App. 458) So there is plenty of reason why the large
dairies are promoting and maintaining the present litiga¬
tion.
We think this Court can take this factor into consider¬
ation. Even assuming that under the present state of the
law champerty or maintenance of a suitor does not destroy
his cause of action as such, (Burns v. Scott, 117 U. S. 582,
591; Jamison Coal Co. v. Goltra, 143 F. (2) 889, 895; John¬
son v. Van Wyck, 4 App. D. C. 294, 323-4), still, as the
present suit in asking equitable relief must appeal to the
conscience of the Court, the fact that Plaintiffs are act¬
ing for another’s prime benefit and not for their own, and
that the result of granting them relief will be mischief
and not the public benefit, should have been considered by
the Court in deciding their case. After all, Plaintiffs are
asking no mean judicial action: for the few hundred dol¬
lars (See Statement of Facts, present Brief, p. 9)
they stand to gain they ask this Court to disrupt an
administrative plan adopted after thousands of pages of
hearings, involving hundreds of thousands of dollars in
each milkshed, a plan the Hood producers, non-members
of co-operatives, voted for 226 to 22 (App. 91) and the
Whiting producers, likewise non-members, 87 to 20. (App.
91) Members of cooperatives voted in favor of the plan
10,744 to 0; individual producers similarly voted 694 to
L6
61. (App. 91) There is no principle of equity we know
of that requires a court to uphold a so-called private
right at the expense of a great public wrong. ( Greathouse
v. Bern, 289 U. S. 352, same case below, 61 App. D. C.
360, 363 F. (2) 137; Morton Salt Co. v. Suppiger Co., 314
U. S. 488, 492; Burford v. Sun OH Co., 319 U. S. 315, 318-
319). Indeed the Dern case is strikingly similar to the
present in that the Court therein said (1) “Petitioners
are entitled to the relief prayed only if several doubtful
questions are resolved in their favor” (Op. p. 357); (2)
it involved an application to a Court to recognize a sup¬
posed technical legal right at the expense of great public
mischief. The Supreme Court held squarely that under
these circumstances a court of equity in the exercise of
sound discretion, “may withhold its protection of an un¬
doubted legal right.” ( Greathouse v. Bern, 289 U. S. 352,
359). Thus, the Court said, the equitable remedy:
“invoked to protect rights to which petitioners are not
shown to be clearly entitled, would be burdensome to
the Government without any substantially equivalent,
benefit to the petitioners ’ ’. (Op. p. 360)
The Supreme Court continued:
“The Court, in its discretion may refuse * # * to
give a remedy which would, work a public injury or
embarrassment (see Duncan Toicnsite Co. v. Lane, 245
IT. S. 308, 62 L. Ed. 309, 38 S. Ct. 99, supra; United
States ex rel. Arant v. Lane, 249 U. S. 367, 63 L. Ed.
650, 39 S. Ct. 293, supra; Effingham v. Hamilton, 6S
Miss. 523,10 So. 39; cf. Re Lindgren, supra (232 N. Y.
66, 133 N. E. 353); McCarthy v. Street Comrs., 188
Mass. 338, 74 N. E. 659, supra, just as- in its sound dis¬
cretion, a court of equity may refuse to enforce or
protect legal rights, the exercise of which may be
prejudicial to the public interest. See Seaboard Air
Line R. Co. v. Atlanta, B. & C. R. Co. (C. C. A. 5th)
35 F. (2d) 609; Conger v. New York, W. S. & B. R.
Co., 120 NT Y. 29, 23 N. E. 983; Clarke v. Rochester,
L. db N. F. R. Co., 18 Barb. 350; Whalen v. Baltimore
& 0. R. Co., 108 Md. 11, 69 Atl. 390,17 L. B. A. (N. S.)
17
130, 129 Am. St. Rep. 423; Curran v. Holyoke Water
Power Co., 116 Mass. 90; Southern R. Co. v. Franklin
& P. R. Co., 96 Va. 693, 32 S. E. 485, 44 L. R. A. 297;
cf. Willard v. Tayloe, 8 Wall. 557, 19 L. Ed. 501.
Affirmed.”
It is submitted that no mattei what the. Court found
as to plaintiffs’ technical legal right, a right sustainable
only if all doubts be resolved in plaintiffs’ favor, the
Court should have denied relief on the basis of an en¬
tirely disproportionate public injury which will result.
Also, the fact that the present plaintiffs are in reality
acting for the benefit of the two largest dairies in New
England in an attack upon the cooperatives is entitled to
consideration in connection with plaintiffs claim that this
is a class suit, and that they act on behalf of themselves
and all others similarly situated. (App. 2) We emphasize
that plaintiffs are non-members of the cooperative and,
hence, cannot act on behalf of members because they do
not belong to that class, (Rule 23a, Rules of Civil Pro¬
cedure, Clark, v. Chase National Bank , 45 Fed. Sup. 820,
823.; 3 Moore's Fed. Prac. (2d Ed.) p. 3419. Plaintiffs can
act only for non-members. Even as to non-members, there
is no showing that other non-members are united in oppos¬
ing the deduction; indeed, plaintiffs admitted that all pro¬
ducers shipping to Hood and Whiting were not opposed
to the cooperative deductions. (App. 256, 274.) Under
the law two-thirds of all producers must be in favor of
any given Order before it can be adopted. (R. 84, 256)
Hence, there is considerable doubt whether plaintiffs are
entitled to contend that they represent even non-members.
As said in Clark v. Chase National Bank, 45 Fed. Sup.
820,823:
“One cannot be a representative of a class institut¬
ing litigation on behalf of all other members of the
class unless his interests are theirs. A conflict in
interest destroys the representative character of his
action. It 4 does not afford that protection to absent
parties which due process requires’. Hansberrv v.
Lee, 311U. S.32.”
18
The record shows that plaintiff Stark’s financial stake
in the present litigation w T as at the rate of two cents per
hundredweight of milk delivered by him, around one hun¬
dred dollars ($100) as of the end of 1945. (App. 357).
Plaintiff Walsh’s deductions amounted to around six cents
a day. (App. 267). Plaintiff Stebbins’ deductions from
1946 to 1948 inclusive amounted in all to around two-
hundred and ten dollars ($210) and Stebbins has since
jointed a cooperative from which he receives benefits.
(App. 287). This would appear to disqualify Stebbins
as representative of a class of non-members. Plaintiff
i Denton from 1941 to 1948 had deductions of around two
hundred and forty-two dollars ($242). (App. 326).
It is at the instance of these plaintiffs with these
meagre financial interests that the court below has over¬
turned a comprehensive system of regulation, adopted
after extensive hearings by the Secretary, on the advice
of experts in this field. We think the court below abused
its discretion in entertaining the suit under these circum¬
stances and that the suit w'as not in truth and in fact a
class suit. Under these circumstances where a purported
1 class suit is not so in fact, it is the duty of the court to
dismiss. ( Bic?:ford’s, Inc. v. Federal Reserve Bank, 5
Fed. Supp. S75, 877; Clark v. Chase National Batik, 45
Fed. Sup. 820, 823).
We think the present case comes fairly within the fol¬
lowing rule:
“When a suit is brought with a view of affecting
the rights of third parties, and it is apparent that
that is its sole object, the suit ceases to be adver¬
sary' and becomes collusive.” ( Meeker v. Straat, 38
Mo. A. 239, 243) See also Ward v. Alsup, 100 Tenn.
619, 739; Lord v. Veazie, 8 How. 251.)
The present case is somewhat similar to 17. S. v. Johnson
319 U. S. 302 except that in the latter case the collusion
existed on both sides of the case. Here the collusion is one
side only, it is true, but there is an equal imposition upon
the court.
19
Point II
Congress Has Authorised the Secretary of Agriculture,
Upon Proper Findings, Based on Substantial Evidence
Received at Hearings, to Provide for Payments to
Producer-Owned and Controlled Co-operative Associa¬
tions for Services Rendered to Effectuate the Purposes
of the Act and of a Marketing Order Issued There¬
under. The District Court Erred in Its Contrary
Holding.
The act is the Agricultural Adjustment Act (August
24, 1935, 49 Stat. 750, 7 U. S. C. 601 et seq.), as amended
by Marketing Agreement Act of 1937 (50 Stat. 246. 7
IT. S. C. 601 et seq.).
Authority for these payments is contained (A) in a
specific provision and (B) in general provisions of the
Act.
A. The specific provision is Section 8c(7)(D) (Section
608(7) (D)) which relates to terms common to all orders
as distinct from Sections 8c(5) and 8c(6) which relate to
specific terms in milk orders. This provision was re¬
ferred to by the Secretary as giving him special authority
in Finding No. 3 (R. 3). The section authorizes one
or more terms and conditions in an order and paragraph
(D) is as follows:
“(D) Incidental to, and not inconsistent with the
terms and conditions specified in subsections (5),
(6) and (7) and necessary to effectuate the other pro¬
visions of such order .’ 9
This is a broad power and has been held to be auxiliary
to the definite provisions. 1 There are only three limita¬
tions to this provision as set forth therein, namely, they
must be incidental to, not inconsistent with other provi¬
sions and necessary to effectuate the order.
1 United States v. Rock Royal, 307 U. S. 533, 575.
20
This Court has held that “incidental” is something
additional, accessory or collateral and that incidental power
is additional power although connected with the main sub¬
ject 2
Surely the provision in question meets these tests. It
is also not inconsistent with the other provisions of the
order which, as shown by the discussion infra, relate to
basic mechanics of the order, viz., classified price and
equalization and the necessary steps to put them into ef¬
fect and integrate them. The co-operative provisions
are distinct and supplementary in their nature and do not
conflict with the others. They are incidental and appro¬
priate provisions left to the discretion of the Secretary
to be granted after evidence and proper findings.
The word “necessary” should not be construed as “in¬
dispensable, essential or vital.” It is a word to be har¬
monized with its text and construed in accordance with
existing conditions. 2
The word has been broadly construed and also as to
embrace all things suitable and proper for carrying into
execution the powers granted. 4
The delegation of power to the Secretary to incorporate
provisions in an order to effectuate the policy of the act
and the other provisions of the order is not novel. Similar
provisions with like verbiage or import are contained in
various federal statutes. 5
2 Middleton v. Parker, 3 App. Dec. 149, 160; See also Dunvooody
v. United States, 22 Ct. Cl. 269, 280; Words & Phrases, VoL 20 p.
423; Dickey v. Raisin Proration Zone, 24 Cal. (2d) 796, 151 P. (2d)
505.
3 Armour & Co. V. Wantock, 323 U. S. 126, 129, 180.
4 United States v. Denver & Rio Grande R. Co., 150 U. S. 1;
General Investment Co. v. Bethlehem Steel Corp ., 248 F. 303, 311
(D. C. N. Y.).
5 §§159(b) and 160(c), National Labor Rel. Act, Tit. 29 U. S. C.;
49 Stat. 453; Commodity Exchange Act, §12a(5). Tit. 7 U. S. C.;
49 Stat. 1500 upheld in Nichols & Co. v. Secretary of Agriculture,
Regulations of the administrative board pursuant to
snch provisions in the National Labor Relations Aet have
been upheld.*
Indeed in the Phelps Dodge case (cited below) the Court
pointed out at page 191 that the effectuation clause was
“the central clue to the Board’s powers,” and it held that
Congress could not define the whole gamut of remedies
to effectuate the policy of the Act and leaving the adapta¬
tion of means to end to the empiric process of administra¬
tion, had committed the exercise of the process to the
Board. Also that Courts should not curtail the exercise
of such a power nor “enter the allowable area of the
Board’s discretion” after a determination by an adminis¬
trative agency upon findings.
In Yakus v. United States, 321 U. S. 414, 427, in con¬
struing the Price Control Act, the Court held that the
Administrator was given wide discretion as to the condi¬
tions of an order (p. 438); that he had power to formu¬
late subsidiary administrative policies within the statutory
framework and that it was proper for Congress to give
an officer ample latitude in determining the necessary
conditions (p. 425). It was also held in United States v.
Rock Royal, 307 U. S. 533, 574, that it was proper to
delegate authority to make regulations which would im¬
plement the general provisions of the statute.*
131 F. 2d 651, 658; Bituminous Coal Conservation Act, §833(d).
Tit. 15 U. S. C.; 50 Stat. 77; Tobacco Inspection Act, §511-m. Tit
7 U. S. C.; 49 Stat. 734; Agricultural Adjustment Act, §§608(2)
(a)(8) also 608a(2), Tit. 7 U. S. C.; 48 Stat. 34, 672; Emergency
Price Control Act of 1942, §2(a), 50 U. S. C. (Appendix 25) 56 Stat.
23; Fair Labor Standards Act, 29 U. S. C. A. §208(f), construed in
Gemsco v. Walling, 324 U. S. 244, 255.
c Frank Bros. v. National Labor Rel. Board, 321 U. S. 702, 704;
National Labor Rel. Board v. Hearst Publications, 322 U. S. Ill,
131-2; Southern S. S. Co. v. National Labor Rel. Board, 315 U. S.
31, 46; Phelps Dodge V. National Labor Rel. Board, 313 U. S. 177;
7 See also Lichter v. United States, 334 U. S. 742, 785.
22
A similar delegation of power was involved under the
Second War Powers Act of 1942 involving the power of
the President to issue regulations to effectuate the policies
of the Act. The War Food Administrator established
quotas of milk, cream and by-products for sale by handlers
and required that the handlers pay expenses of enforce¬
ment of the regulation by a per hundred-weight as¬
sessment. Apparently there was no direct authorization
for this and reliance was placed upon the discretionary
power of the Administrator to effectuate the policies of
the Act. The District Court held the assessment to be
unauthorized but this decision was reversed by the Cir¬
cuit Court of Appeals which held the assessment to be
necessary to fill out the details of Congressional action,
that the Administrator had the power to ascertain facts
and apply the statute to the result and that it was an in¬
cident proper to the regulation of the industry. A peti¬
tion for writ of certiorari was denied. 8
The Court below while apparently considering that the
co-operative payment, provision in the order was incon¬
sistent on its face with other provisions of the order,
considered the words “incidental” and “necessary” purely
abstractly from the standpoint of legal definition and
w’holly ignored the specific findings of fact by the Secretary
that such provision was incidental, necesary to effectuate
the other provisions of the order and not inconsistent (7
CFR, 1941 Supp. 904.0). This was improper and espe¬
cially so because the judgment of the Secretary in this
regard was not subject to review, 9 and it has been held
that such a determination is one of fact, 10 and that there
R Warehime V. Varney, 54 F. Supp. 907, D. C. N. D., Ohio, E. D.,
147 F. 2d 238, 6 C. A., and 325 U. S. 882.
9 United States v. Bush & Co., 310 U. S. 371 and National Labor
Relations Board v. P. Lorillard Co., 314 U. S. 512.
10 Kalamazoo Auto Sales Co. v. Travelers Ins. Co., 222 Mich. 74,
198 N. W. 579;
23
is a presumption of the existence of facts justifying the
specific exercise. 11
The duty of the Secretary to insert provisions to ef¬
fectuate the policies of the Act are contained in Sections
8c(3), 8c(4) as well as 8c(7)(D) and it was held in
United States v. Kelly, 55 F. 2d 67, 70 (C. C. A. 2) that
such a duty carried by implication every reasonable means
necessary to effectuate the desired end.
Unless the determination as to what provisions of an
order are incidental and necessary be left to the Secretary
as an expert, his powers will be greatly curtailed. His
findings, unless clearly outside the scope of the Act or a
clear case of abuse of discretion, are conclusive.”
There was a second finding in 1944 by the Acting Direc¬
tor of Food Distribution who had taken over the duties
of the Secretary of Agriculture as to orders by direction
of the President. This finding is set forth in 9 F. R. 3059
(issue of March 21, 1944) and in part is as follows:
“The present plan of payments to cooperatives,
which became effective August 1, 1941, was based on
the consideration that to achieve the benefits to all
producers which the order is designed to provide two
types of activity by producers’ cooperative marketing
organizations are desirable—(1) presentation of evi¬
dence at hearings concerning the needs of producers
with respect to prices for milk and differentials to
reflect handling costs to furnish an adequate basis for
constructive amendments to the order, and (2) as¬
sumption of reponsibility for a reserve of milk to
meet the irregular needs of distributors which is es¬
sential in a market which provides market-wide equali¬
zation among all producers of the total value of the
milk. Further, it is recognized that allowances for
costs associated with providing services to the market
11 Thompson v. Consolidated Gas Utilities Corp., 300 U. S. 55, 69.
12 Gray v. Powell, 314 U. S. 402, 411, 412; Gemsco V. Walling, 324
U. S. 224; American Power & Light Co. V. Sec., 329 U. S. 90, 112.
24
should be separated from the allowance which re¬
flects the additional cost of receiving milk at country
plants compared to receiving it directly at city plants.
From these considerations it was concluded that pro¬
vision for payments to cooperative associations is
considered necessary to equitably apportion the total
value of milk among producers. The testimony in
support of the proposal to completely eliminate this
feature of the order does not show that these con¬
siderations were substantially erroneous.”
The reference in such finding to the allowances for costs
associated with handling surplusses of the market is ap¬
parently in reference to the fact that in some of the orders
prior to that of 1941 there was an extra charge allowed
to co-operatives for handling milk and that this was
dropped at the time of the insertion of the provisions
for co-operative payments in 1941. (Affidavit of Thomas
G. Stitts App. 77).
B. General Provisions.—These are Secs. 1, 2, 8c(18)—
[(601), (602), (608c) (18)] of the 1937 Act and 10(b)(1)
of the 1935 Act, Sec. 610(b)(1) 49 Stat. 801. They relate
to the general purpose and intent of Congress. They
must be read with Secs. 8c(5), 8c(7)(D) as part of the
Act because the Act must be interpreted as a harmonious
whole. 13 The legislative policy and purpose are control¬
ling. 14 They control over literal words. 13
Secs. 1, 2 and 8c (18) should be read together inasmuch
as they relate to prices to be paid to producers and ex¬
press the intent of Congress. They are in fact a full
change of the 1935 Act which based such prices on the
so-called “parity” plan, to prices resulting from orderly
13 Great Northern Ry. v. United States, 315 U. S. 262, 272; D.
Ginsberg & Sons V. Popkin, 285 U. S. 244.
14 United States v. Congress of Industrial Organizations, 325 U.
S. 106, 112: Securities & Ex. Comm. v. C. M. Joiner L. Corp., 320
U. S. 344, 857; Lichter v. United States, 334 U. S. 742, 785.
13 United States v. American Trucking Asso., 810 U. S. 534, 542-4.
25
marketing (Secs. 1-2) and take into consideration some
costs of production, economic factors affecting supply and
demand and prices which will insure an ample supply for
the market (8c(18)).
Nowhere in Sec. 8c(5) as to prices to producers or to
dealers is there any mention of factors relating to or¬
derly marketing or prices which will insure an ample
supply. The adjustments there mentioned take no cogniz¬
ance of them. As discussed infra under Point III, the
co-operative i>ayment provision was closely connected with
such factors.
Section 10(b) (1) is as follows:
“The Secretary in the administration of this title,
shall accord such recognition and encouragement to
producer-owned and producer-controlled co-operative
associations as will be in harmony with the policy
toward co-operative associations set forth in existing
acts of Congress, and as will tend to promote efficient
methods of marketing and distribution.”
Aside from special privileges for co-operatives under
the Capper-Volstead Act in relation to restraints of trade;
(42 Stat. 388, 7 U. S. C. Sec. 291), the Co-operative Mar¬
keting Act of 1926 (44 Stat. 802-3, 7 U. S. C. Sec. 451-5)
in regard to promoting co-operatives and exchange of in¬
formation, exemption from Income Tax by Sec. 231 of
Income Tax Act of 1926, 44 Stat. 9 (now Sec. 101, 26
IT. S. C,); there is the Agricultural Marketing Act of
1929 (46 Stat. 11) (now 12 TJ. S. C., Sec. 1141) in which
the policy of Congress was declared to be promotion of
effective merchandising of agricultural commodities by
encouraging the organization of co-operatives for greater
unity of effort in marketing and also controlling surplusses
so as to prevent depression of prices.
The reports of the Congressional Committees on the
1935 Act H. E. 1241, pp. 9-11 and Sen. 1011, pp. 9-11,
pointed out that the provisions of Sec. 8c of the Act em-
26
bodied the methods employed by co-operative associa¬
tions. Among these methods apparently were a check off
to a Chicago milk co-operative (Pure Milk Association) of
14 per cwt. on the milk of all producers 'whether or not
members of the Association, later increased to 24 and
then to 3^ per cwt. for an adjustment fund to take care
of surplus and advertising and the check-off in the Twin-
City License, p. 28, infra.
There is also Congressional history in regard to Section
10(b)(1). Apparently at the hearing before the House
Agricultural Committee on the original bill, Mr. Chester
Davis of the Department of Agriculture in answer to a
question admitted that it was not the purpose of the
proposed provision to give preferential treatment to co¬
operatives. However, later at the hearing before the Sen¬
ate Committee on Agriculture & Forestry, 75th Cong. 1st
Sess., on S. 1807, pp. 45-6 Mr. Davis while stating that it
was not the intention to discriminate in favor of co-oper¬
atives said it might be necessary in case of milk orders
and specifically said: “I can conceive of that in the case
of milk. I would not like to have our power questioned.”
Possibly as a result of Mr. Davis’ statement to the House
Committee both House and Senate Reports (H. R. 1241,
p. 13 and Sen. No. 1011, p. 26) stated in reference to this
section:
“It is not intended by this language to discriminate
against other handlers, processors, or dealers, but it
has been found from experience that the participation
by local committees and associations of producers has
been of material value in administering the program.”
A rider -was adopted by the House prohibiting such a
discrimination against other producers, processors and
handlers and this was stricken out by the Senate. The
ie See Report of Federal Trade Commission re sale and distribu¬
tion of Milk in Chicago Sales Area, House Doc. No. 451, 74th Cong
2nd Sess., p. 47.
27
House accepted the Senate version. 17 Thus Congress after
consideration struck out a limitation which would have
expressly prohibited the co-operative payment provision.
While this action is not conclusive, it is to be considered. 1 *
The Courts have also recognized the public policy in
regard to co-operatives. 10
The Committee Reports, supra, are also important in
regard to their recognition of the value of services by
local associations in administering federal programs. They
express the intent of Congress. Such reports are relevant
in interpretation of a statute, no matter how clear words
may appear on superficial examination. 20
Prior to the passage of the Agricultural Marketing
Agreement Act of 1937, the State of New York amended
its Milk Control Act and authorized (in paragraph 9 of
§258-m) deductions for marketing services by co-opera¬
tives 21 and later this was amended to make clear that such
deductions should be paid to co-operative associations for
services by them. 22
Federal Order No. 27 for the New York area issued in
August 1938 contained provisions for co-operative pay¬
ments. The Order was issued not only pursuant to the
provisions of 8c(5) but also pursuant to Section 10(1) of
the Federal Act which authorized .uniform regulations and
concurrent orders to carry out federal and state pro-
17 House Conference Committee Rept. No. 1747, Aug. 12, 1935, p.
28.
18 Fox v. Standard Oil Co., 294 U. S. 87, 96; United States V.
United Machinery Co., 64 F. 138, 174 (D. C. E. D. Mo.) ; Cudahy
Packing Co. V. Holland 315 U. S. 357, 366.
19 United States v. Rock Royal, 307 U. S. 533, 563; Tigner V.
Texas, 310 U. S. 141, 145-7; Liberty Warehouse Co. v. Burley
Tobacco Co., 276 U. S. 71, 93, 96. .
20 Harrison v. Northern Trust Co., 317 U. S. 476, 479.
21 Chap. 383 of the Laws of 1937 in effect May 19.
22 Par. 11 of Sec. 258-m, as amended by Chap. 760 of the Laws of
1939.
26
grams and pursuant to an agreement between the federal
Secretary of Agriculture and the state Commissioner of
Agriculture and Markets ( H . B. Hood & Sons v. DuMond,
69 S. Ct. 657,666).
Also the Indiana Milk Control Law of 1935 (Chap. 281,
Par. 11 of Sec. 5) authorized check-offs to either local milk
committees or co-operatives for marketing services.
The marketing agreement license for the Twin City
Area—No. 5, issued in August 1933, of which the Court
can take judicial cognizance, 23 contained provisions where¬
by dealers who purchased milk of non-members of the
co-operative association should pay such Association the
difference between the price which the Association paid its
members and the class price for the milk as a service charge
for regulating the supply. This license and agreement was
one of those ratified by the 1937 statute.
Point III
The Court Below Erroneously Concluded That the Secre¬
tary Exceeded His Statutory Authority in Inserting
in the Order the Provision for Deductions for Pay¬
ment to Co-operative Associations.
The opinion of the Court holds (a) that the statute did
not expressly authorize such deductions, (b) that they were
not “incidental” provisions, (c) that they were not neces¬
sary to effectuate the other provisions of the order, (d)
that they could not be considered as “not inconsistent”
with the other provisions of the order, (e) that the admin¬
istrative interpretation was not of sufficient weight to be
•considered and (f) that the legislative history of the Act
was illuminating and adverse.
While it is true that there is no authority in specific
words in the Act for the questioned provision, there is, as
53 Caha v. United States, 182 U. S. 211, 221; Lilly v. Grand Trunk
Western Ry^ 317 U. S. 481, 488; Thorsch v. Miller, 5 F. 2d 118, 121.
29E
pointed out in Point II, supra, authority therefor in the
various sections of the Act. The Court apparently relied
to a large extent in use of the words “no others” in Sec¬
tion 8c(5) as limiting authority to the specific clauses.au¬
thorized in 8c(5)(A)(B). However, the Court apparently
overlooked, the words preceding these words which were
“except as provided in sub-section (7).” These latter
words are controlling and inasmuch as they are in the
overfall or controlling part of 8c(5) they apply to all the
provisions of such- sub-section. The Court also referred
to the word “only” in 8c(5)(B)(ii) in connection with
adjustment of prices .toproducers^shaving a similar*effect
as “no others.” This conclusion, is contrary to the ra¬
tionale of the section as disclosed by. the background, of the
Act and practical operation of the order.
Federal regulation of the milk industry became neces¬
sary because of the interstate commerce handicaps of state
control. New York State was largely the instigator of
these state controls- 23 as a result of an intensive legislative
investigation summarized in Nebbia v. New York, 291 U. S.
500. Other states- followed its example. Because state
control was held ineffective on interstate shipments in
Baldwin v. Seelig, 294 U. S. 511, the Governors of New
York and other states appealed to Congress for a federal
act. 28 State regulation used what is commonly known as
the classified price for prices to dealers and equalization
of prices to producers was advisable to implement the
classified price plan and prevent price discrimination be¬
tween producers because of varying uses of milk at differ¬
ent values by the various dealers to whom the milk was
delivered. 27
Section 8c(5)(A) was intended solely to provide a basis-
for pricing to dealers, that is, the classified price plan,, and
25 Chap. 158, Laws of 1933;
28 Vol. 79, Cong. Rec. No. 144, p. 11583.
17 United States v. Rock Royal, SOT U. 3-. 525, 571-22
30
Section 8c(5)(B)(C) for a uniform price to producers
(uniform meaning the same base price for milk delivered
to fluid plants and for that delivered to manufacturing
plants) through equalization of all sales. 28
These features were an adoption of state experience and
the use of “only” was to insure that these two basic prin¬
ciples and these only should be used in orders.
“Congress by stating expressly its primary ends
does not deny resort to the means necessary to achieve
them.”
Gemsco v. Walling, 334 U. S. 244, 262.
The co-operative payment features were not basic prin¬
ciples and were incidental thereto. Secondly, the adjust¬
ments referred to in sub. (ii) of 8 e(5)(B) are those made
in the payments to the individual producers after the uni¬
form or pool price has been determined from the combined
net sales to all dealers. For example, one is for butterfat
and bacteria tests which, of course, can relate only to the
individual producer’s deliveries and are not a general
expense to be deducted from the blended price. The other
adjustment is on account of differentials to the individual
producer on account of location of farm with respect to
point of delivery or by reason of his locality being nearer
the market where a higher price has been customarily paid
as distinguished from distant points where a lower price
has prevailed. Thus the word “only” was used to limit
that kind of adjustments. It had no reference to general
deductions from the blended price, and in any event it was
subject to the general exception which permitted provisions
authorized by Section 8c(7). The “further adjustment”
next mentioned probably relates to what is commonly
known as “base rating plan.” It concerns only additions
to or deductions from the checks of individual producers
on account of deliveries in compliance with or in excess of
production quotas, if any, fixed by an order.
58 S. Kept. No. 1011, 74th Cong. 1st Sess., pp. 9-11, H. R. 1241,
pp. 9-11.
31:
All of the foregoing listed deductions are made from the
producers’ checks after determination of the blended or
pool price to be distributed to producers. This distinction
was made in Stark v. Wickard, 321 U. S. 288, 300-1, and a
similar deduction for a revolving fund was mentioned
there.
The ruling of the Court in this matter would seem
squarely in conflict with the decision in Green Valley v.
United States 29 where under the terms of Order No. 4
there was a price differential in favor of co-operative asso¬
ciations. Also to that in Bailey Farm Dairy Co. v. Ander¬
son 30 where a quota on outside milk was imposed in pricing
to dealers and thus the word “only” in 8c(5)(A) was in
effect disregarded.
An equally serious objection to the opinion of the Court
below is that the heading of 8c(7) is “Terms Common to
All Orders.” Reading this with the exception of 8c(5),
there is a clear implication that nothing contained in
8c(5)(A)(B), unless expressly inconsistent, shall prevent
incidental provisions under 8c(7)(D); also the first sen¬
tence of (7) declares in effect that all milk orders shall
contain one or more of the terms there listed. There was
no inconsistency. Claims were made in the Court below
that paragraphs (E) and (F) of 8c(5) were inconsistent
with the deduction provision. (E) relates solely to deduc¬
tions of benefit to the individual producers, viz., general
market information as to sales, prices, etc. and checking
weights and tests of the producers and obtaining security
for amounts due from the dealers. Such checking and
furnishing of security would be of no benefit to producers
of another dealer. On the other hand the deduction for a
co-operative as outlined in the Report of the Food Admin¬
istrator, supra, (p. 23) was dual in nature. It provided
for remuneration to co-operatives for services in the prep-
29 108 F. 2d 342 (C. C. A. 1).
30 157 F. 2d 87 (C. C. A. 8), Cert, denied 329 U. S. 788.
32
aration of orders and amendments thereto and famishing
reserves of milk to supply the market Unorganized pro¬
ducers are wholly unable to present to the Secretary any
rational marketing programs. They have neither cohesion,
knowledge of marketing problems, experience in marketing
or legal and technical experts. On the other hand, the co¬
operatives have all of these/ This latter is squarely within
the realm of orderly marketing and furnishing of ample
supply to the market. In this regard there was uncontra¬
dicted evidence in this case that the smaller dealers would
not buy their supplies in the short season of production
from the big dealers and it was necessary for the co¬
operatives to furnish them a large part of their supplies
which in turn involved the handling of surplus by co-opera-
atives. Thus these services were found to be necessary
to effectuate the other provisions of the order. They were
in fact connected with the purposes of the Act set forth
in Sections 1, 2 and 8c(18), including adequate supplies
for the market. The terms of an order must tend to
effectuate the policy of the Act. 8c(4).
Furthermore (E) has two subdivisions, (i) being limited
to producers for whom the services mentioned and not
furnished by a co-operative, while (ii) is not so limited.
It relates to security for payments to producers. This is
one of the express purposes of the deductions here in¬
volved.
Provisions similar to those authorized by (i) were con¬
tained in the Boston 1936 order and in other orders and
licenses and are in the present Cincinnati and Dayton-
Springfield orders. The Chicago 1933 license contained
provisions for deductions to be paid to an independent
agency for advertising and to care for credit losses and in
the Twin-City 1933 license, a similar provision on account
of advertising. In both was a statement that such pay¬
ments “shall be deemed part of the price paid to pro¬
ducers.’ * The fact that such provisions were ratified by
Congress in 1937 shows intent that such kind of deductions
33
and payments were proper. Such ratification made such
deductions lawful. 31 House Report No. 1241, p. 11 and
Senate No. 1011, p. 11, specifically mentioned both kind of
services mentioned in (i) and (ii).
As to (F) a co-operative under its contract with pro¬
ducers may blend sales proceeds both under and outside
of a federal order. The impleaded defendant here does
this and but for (F) a serious question would arise as to
impairment of contracts. To obviate this some federal
licenses and various state Acts contained a similar provi¬
sion.”
The Committee Reports, supra, (p. 25) stated that
the provision in (F) was to safeguard co-operative con¬
tracts with producers. (F) relates only to distributive
payments by a co-operative to its producers and is not
related to 8c(7)(D).
As discussed previously (p. 23) the determination as to
necessity of a provision to effectuate the other provisions
of the order was one for determination of the Secretary
upon evidence and findings and not for the Court unless
wholly arbitrary and without substantial evidence, neither
of which conditions exist here.
The subjects of administrative interpretation and legis¬
lative history will be discussed infra, Points IV and V.
In considering the word “necessary 1 ’ it should be noted
that the members of the co-operatives bear the extra ex¬
penses of their associations in servicing the market and
maintaining able and experienced staffs to aid in prepara-
81 Svxiyne & Hoyt V. United States, 300 U. S. 297, 302; United
States V. Von Clemm, 136 F. 2d 969, 970 (C. C. A. 2).
82 Chicago License No. 30, issued December 31, 1934; Dubuque
License No. 94, issued November 30, 1934; Des Moines License No.
31, issued December 31, 1934; Sec. 19 Pennsylvania Act of 1933
(No. 37); Sec. 313 of Chap. 168, New York Laws of 1933: Sec. 16
of Oregon Act of 1933; Sec. 11 of Connecticut Act of 1933; Sec.
l(i) of Art. VI of Chap. 169 of New Jersey Laws of 1933; Sec. 21
of Indiana Act of 1936; Chap. 281 and Sec. 20 of Ohio Act of 1933.
34
tion of orders. Thus these members get a lower price for
their milk than the non-co-operative producers. Therefore,
a counteracting differential (co-operative payment) must
be created to prevent “market pool equalization” from
placing the co-operative producers in a less favorable po¬
sition than that enjoyed by non-co-operative producers;
otherwise, such a situation would threaten the very exist¬
ence of the organizations which designed the statutory and
regulatory program, viz., the co-operatives.
In applying a rigid leveling process by a regulation,
such as market pool equalization, some countervailing
adjustments are proper and in fact necessary to keep from
destroying the basic organizations of the beneficiaries of
the regulation.
Correctly viewed, co-operative payments are a mere
refinement and perfection of equalization.
Control of milk is a vital feature of orderly marketing
and adequate supply for the market. Unorganized pro¬
ducers have no control of their milk after delivery to the
dealer who may, at will, ship to Boston or any other market
under Order No. 4 or otherwise, wherever higher prices
are obtainable. Co-operatives, however, as a condition of
their payments must have control of their milk in order to
take care of the market. 33
Point IV
The Secretary’s Order Was An Administrative Interpreta¬
tion of His Authority Which Is Entitled to Great
Weight.
A provision for co-operative payments in the New York
order was inserted in August 1938 or within about fourteen
months from the enactment of the Marketing Act of 1937. 34
“ Sec. 904.9(a) of Boston Order; Sec. 5 of Art. VII of New York
Order of 1938; Appendix
54 Sec. 5 of Art. VII set forth in United States v. Rock Royal
Co-op^ 307 U. S. 533, footnote No. 14. Judicial notice can be taken
of these orders. Caha v. United States, 152 U. S. 211, 221; Lilly
v. Grand Trunk Ry., 317 U. S. 481, 488.
35
Similar provisions in the Boston Order were inserted in
1941, in the Cincinnati Order in 1944 and in the Dayton-
Springfield Order in 1945. Each of these provisions is still
in effect although in somewhat modified form. Thus the
New York Order provision was a substantially contempo¬
raneous interpretation made by an expert charged with
responsibility of setting the machinery in motion and
making it work; and it has been in effect nearly eleven
years; also it was his staff which presented the original bill
to Congress, all of which features add weight to the inter¬
pretation. 33
The Court below (App. 149) refused to accept this in¬
terpretation because (a) it was not one continued over a
long period. The cases cited, however, seem to have been
impliedly overruled by the later decisions which apparently
base the test on contemporaneous interpretation continued
only as to consistency, and (b) because an administrative
officer cannot be allowed to interpret his own powers.
Again the case cited seems to have been impliedly over¬
ruled by almost constant practice of administrative officials
and decisions. 36
The 1938 interpretation by the Secretary involved not
only the provision relating to co-operative payments in¬
serted in the New York order but the explanation thereof
by his department set forth in Appendix I, present brief,
which in part states that co-operative associations render
services of benefit to all producers in securing highest
35 Billings v. Truesdell, 321 U. S. 542, 552; White v. Winchester
Country Club, 315 U. S. 32, 41; Great Northern Railway V. United
States, 315 U. S. 262, 275; Gray V. PoweU, 314 U. S. 402, 412-413;
Gemsco v. Walling, 324 U. S. 244; Virginia E. L. & P. Co. V. N. L.
R . Bd., 319 U. S. 533, 539, 540.
36 See Fleming v. Mohawk Wrecking & Lumber Co., 331 U. S. Ill,
116; United States V. American Trucking Association, supra; Tagg
& Moorehead V. United States, 280 U. S. 420, 435; Illinois Natural
Gas Co. v. Central Illinois P. L. Co., 314 U. S. 498, 509, where
apparently similar powers were exercised.
36
utilization of milk under the order and supplying dealers
with milk when needed.
Point V
Subsequent Legislative History Supports the Validity of
the Co-operative Payment Provision Involved Here.
Subsequent history is a valuable aid in interpretation
of statutes. 37
In the Rock Royal case, early in 1938, the District
Court 3,i in a sweeping decision held both the Act and the
New York order to be invalid. Although the question was
not raised by the pleadings or on the trial, the Court in
its opinion stated that the co-operative payment provisions
in the New York order were not expressly authorized by
the Act The Supreme Court in its general reversal held
that the defendants were not in a position to raise this
question.
In view of these decisions, in 1940 in Senate Bill No.
3426 by Mr. Gillette which contained numerous amend¬
ments to the Agricultural Adjustment Act, a provision
was inserted in Section 4 amending Section 8c(5)(C) by
adding a provision (i) specifically authorizing co-operative
payments and (ii) payments to handlers for disposal of
surplus. The first part is as follows:
“ ‘Providing further (i) reasonable compensation
(to be paid out of any pool or fund) established under
this paragraph (C) of subsection (5), as determined
by the Secretary, to bona fide cooperative marketing
associations, all of whose operations are under the
full control of milk producers, for services rendered
to producers of milk or its products covered by the
order by performing such marketing functions speci¬
fied therein as the Secretary determines will tend to
effectuate the declared policy of this Act, including
17 Great Northern Ry. V. United States, 315 U. S. 262, 277.
s * 26 F. Supp. 534 (N. D. N. Y.); 307 U. S. 533.
37
but not by way of limitation, h an dl i n g of surplus
milkj or making available to the market a sufficient
supply of milk at all times: Provided, however, That
no such compensation shall be paid to any cooper¬
ative association which does not comply with the ap¬
plicable provisions of the order: * * *”
Apparently this was a revision of H. R. 6208 intro¬
duced in the First Session of the 76th Congress, the Gillette
bill being introduced in the Third Session.
Hearings were held on the House bill by its Committee
on Agriculture on June 1, and June 2, 1939, and it was
there pointed out that the legality of the provisions of
the New York order for co-operative payments had been
raised in the Rock Royal case; that a decision by the
United States Supreme Court was expected shortly there¬
after (the decision actually was handed down on June 5,
1939) and that one reason for the amendment proposed
as to co-operative payments was a specific provision
authorizing it be inserted in the law (see testimony of
Fred H. Sexauer in Hearing Record, p. 25).
The hearing before the Senate Committee on Agricul¬
ture and Forestry on the Gillette bill was held on April 1,
and April 4, 1940, or a few months after the decision in
the Rock Royal case, and not only were reasons for sup¬
porting payments to co-operatives set forth by witnesses,
but suggestions were also made that specific authority
therefor be given in the statute (see statements by Mr.
Sexauer, R. p. 70, by E. W. Gaumnitz, Director, Division
of Marketing and Marketing Agreements, Department of
Agriculture, p. 53 (Appendix III, present brief) Letter of
Secretary Wallace, p. 5 and statement of the Department
of Agriculture at page 26, which states, in substance, that
the purpose of the amendment was “In order to make
definite and certain the Secretary’s authority in this re¬
gard and to settle the question that insufficient standards
are spelled out in the act to guide the Secretary, it is re¬
garded as essential that the law be amended in the
38
respects contemplated by Section 4 of S. 3426.” This
statement also went into details as to the nature of the
sendees rendered by co-operatives.
The Senate Committee on Agriculture and Forestry
made a report on the Gillette bill and an abstract of such
report is contained in Appendix IV, present brief. The
bill was passed by the Senate, but apparently no action
was taken by the House. The Congressional Record of
September IS, 1940, 76th Cong. 3rd Sess., Vol. 86, Part
11, pages 12,255-12,266, and of September 30, 1940, page
12^80, contains significant facts in regard to this bill.
There were 16 sections in the bill as reported and, as
shown in the Senate Committee Report, Senator Gillette
stated there were no objections to Sections 1 -14, which
included the provisions as to milk. The remaining sec¬
tions related to fruits, vegetables and canning crops.
These latter, as shown by statements of farm organiza¬
tions endorsing the bill (p. 12,265) were very contro¬
versial, as shown by the records of the hearings in both
houses, and especially so in the House. On the other
hand, the record of the Senate hearings show’s that there
was no opposition to the sections relating to milk and
that the farm organizations were unanimous in approval
thereof. Apparently, however, because of the controversy
in the House as to the other sections stricken from the
Senate Bill, no action w T as taken in the House.
It is to be noted that Section 14 of the Gillette bill con¬
tains a provision similar to Section 4 of the Agricultural
Marketing Agreement Act of 1937 ratifying and approv¬
ing all existing orders and this, of course, included Order
No. 27 for the New York area which contains a co-oper¬
ative payment provision.
It is submitted that this Congressional history should
be conclusive as to the intent of Congress, especially in
these four particulars:
39
1. That authority for co-operative payments is actually
contained in Sections 8c(5) and 8c(7)(D) of the Act:
2. The bill sets forth two essentials of co-operative
marketing, namely, handling of surplus and servicing the
market by ample supplies in short periods, which are serv¬
ices rendered by co-operatives. These essentials are the
same as set forth in Point II of this brief.
3. The report and statement on the floor by Senator
Schwellenbach, who represented the Committee, shows
that such services by co-operatives are essential to orderly
marketing and to effectuate milk orders.
4. That the purpose of Section 4 was merely to clarify
the authority for co-operative payments and provide stand¬
ards therefor.
It is to be noted that the Committee on Agriculture and
Forestry was the Committee which approved the 1935 and
1937 Acts and that the 1940 proceedings took place about
five years after the passage of the 1935 Act.
In Sioux Tribe of Indians v. United States, 316 U. S.
317, 329, the Court said in regard to a similar Senate
Report and statement:
“This statement by the Committee which reported
the General Allotment Act of 1887, made within five
years of its passage, is virtually conclusive as to the
significance of that Act.”
And in Porter v. Murray, 156 F. 2d 781, 785, the Court
said:
“The fact that this is a report of a committee of
only one House of Congress does not deprive it of
considerable weight.”
Contcmporaneous History:
In the letter of the Chairman of the Federal Trade
Commission to the House, dated January 5, 1937 (House
Doc. 94) p. 34 is the following:
40
“Producers* cooperative organizations in the areas
investigated have greatly improved conditions in
dairy farming and have probably obtained better
prices for milk than the producers could have ob¬
tained without such organizations.**
These are a part of the services recognized in the co¬
operative payment provision.
And on page 36 is the following:
“It has been established by the investigation that
the activities of most of the bona-fide independent
cooperative organizations have greatly benefited milk
producers. The activities of these organizations
should be broadened and encouragement given to the
extension of such activities as are authorized by the
various Federal and State laws. • • ***
The amendment to the New York Act, subdivision 11
of Section 258-m (Chap. 383, Laws of 1937, amended by
Chap. 760, Laws of 1939) specifically authorized pay¬
ments for co-operative activities under milk control orders.
Also Section 3 of Chap. 760 of the Laws of 1939 ratified
New York Official Order No. 126 (concurrent with and
identical to Federal Order No. 126) and Order No. 27
(regulating the handling of milk in the Buffalo marketing
area) both of which orders contained co-operative pay¬
ment clauses.
Because of the fact that the Federal Act was largely
taken from the New York Act, and in order to have uni¬
formity in control, as expressed in subdivision (i) of Sec¬
tion 10 of the Federal Act, the provisions of the New York
Act should be given strong consideration. 3 ®
In the Parker case, supra, the Court in construing this
provision of the Act said:
39 Parker V. Broxon, 317 U. S. 341, 354; Hoffman V. Palmer, 129
F. 2d 976, 985, afPd. 318 U. S. 109; Metropolitan R. Co. v. Moore,
121 U. S. 558, 572; Merchants Exchange v. Missouri, 248 U. S. 365,
366; Matter of Cregan, 275 N. Y. 337; Bimbaum V. United States,
107 F. 2d 885, 887.
41
“• # * The Act contemplates that each sovereign
shall operate ‘in its own sphere but can exert its
authority in conformity rather than in conflict with
that of the other.’ ”
In other words, the Secretary should not issue orders
in conflict with New York laws.
Furthermore, as to the New York Market Order No. 27,
the Secretary acted under said sect. 10(i) and in accord¬
ance with an agreement with the Commissioner of Agri¬
culture and Markets of New York State.
It was a joint or complementary order with the New
York Order issued after joint hearings. See Preamble to
Order and Sect. 1 of Art. X.
The agreement specifically provided fo-' uniformity in
essential terms of the orders. Thus in case of Order No.
27, we have use not only of the provisions of 8c(7)(D) of
the Act but also of 10(i) in issuance of the order. Sect.
254^n of the New York Act authorizes such action by the
state commissioner.
The New York 1937 Act was effective on May 19, 1937
and the revised Federal Act on June 3, 1937. The first
Federal Order with co-operative payments was that for
New York (Order No. 27) issued August 5, 1938, effective
September 1, 1938. This was suspended in 1939 and was
reinstated effective July 1, 1939. The amendment to the
New York Act (§258-m 11, clarifying the provisions as to
co-operative payments) was effective on June 7, 1939. It
reads in part as follows:
“Any marketing agreement or order of the Com¬
missioner may provide (a) for payments to co-opera¬
tive associations of producers in cases where the
Commissioner finds that such associations are actually
rendering such marketing services to producers under
contract with them, or are rendering services in the
control and disposition of surplus for the benefit of
the market; • • V’
CONCLUSION
The judgment below should be reversed.
Respectfully submitted,
Seward A. Miller
Frank B. Lent
New- York City
Attorneys for Intervenor,
Dairymen’s League Cooperative
Association, Inc.
Wm. E. Leahy
Wm. J. Hughes, Jr.
Bowen Building
Washington, D. C.
Of Counsel
43
APPENDIX I
Extract from Bulletin DM-6, issued August 1938 by
United States Department of Agriculture, Agricul¬
tural Adjustment Administration, Division of Market¬
ing and Marketing Agreements, Dairy Section, in Ex¬
planation of the Federal-State Marketing Plan Con¬
tained in Order No. 27 for the New York Metropoli¬
tan Marketing Area in Connection with the Presenta¬
tion of such Order for Referendum of Producers, and
after Public Hearings Thereon, (pp. 10 and 11).
“PAYMENTS OUT OF POOL
Payments for services by cooperatives are to be made
to those cooperative associations which have been deter¬
mined by the Secretary of Agriculture as having their
entire activities under the control of their members and as
being able to render service to producers as a whole by
facilitating the delivery of milk to persons at the point
where it may be used in the highest possible class and by
making available to handlers in need of milk, an adequate
supply. These payments would go to producers’ cooper¬
atives which exercise control over milk and route milk
into the channels of utilization which net the highest re¬
turns to all producers.
Under the order, any cooperative association of pro¬
ducers may apply to the Secretary of Agriculture for de¬
termination as to its qualifications to receive the cooper¬
ative service payment. If the determination is made in
favor of the cooperative, the service payment is to be re¬
ceived by the cooperative until it has been disqualified by
the Secretary for failure to exercise the authority and to
perform the functions upon which the determination was
made.
These payments are to be made at only one of the fol¬
lowing rates on net pooled milk dealt with by a coopera¬
tive:
44
One cent per hundredweight of net pooled milk to
a cooperative which caused the milk of its members
to be delivered to a handler’s plant and on which the
handler made reports to the market administrator and
paid producers as required under the order;
Two and a half cents per hundredweight of net
pooled milk to a cooperative which has collected pay¬
ments for milk delivered to the plant of a handler
by its members and which has met its obligations
under the order; and
Five cents per hundredweight of net pooled milk
to a cooperative which operates plants, is able to take
care of all the milk of all its members, and is willing
and able to take care of milk from producers who are
not members.’’
APPENDIX H
Extract from Compilation of Department of Agriculture.
“Section 4 of S. 3426
The third proposed amendment to section 8c (5) of the
act, being section 4 of S. 3426, adds new language to the
present law which makes clear and definite the authority
to provide in a marketing order regulating milk and its
products for the payment of cooperative and market serv¬
ice differentials.
The proposed amendment while embraced in a single
paragraph expresses two independent authorizations — one
designated (i) and the other designated (ii).
That part designated (i) refers to payments to cooper¬
atives for rendering services to the market. Such pay¬
ments are authorized in the present law by virtue both
of section 8c (5) (B) and section 8c (7), the former being
quoted hereinbefore and section 8c (7) providing:
‘(7) In the case of the agricultural commodities and
the products thereof specified in subsection (2) orders
shall contain one or more of the following terms and con¬
ditions :
45
‘(D) Incidental to, and not inconsistent with, the terms
and conditions in subsections (5) (6) and (7) and neces¬
sary to effectuate the other provisions of such order.’
Reason .—In order to make definite and certain the Sec¬
retary’s authority in this regard and to settle the question
that insufficient standards are spelled out in the act to
guide the Secretary, it is regarded as essential that the
law be amended in the respects contemplated by section 4
of S. 3426.
The market services for which these payments may be
made to a qualifying cooperative are clearly set forth in
the brief of the United States Government in the case of
United States v. Rock Royal Co-operative, Inc., et al. (307
U. S. 533, 59 S. Ct. 993, pp. 158 et seq.), which may be para¬
phrased as follows:
(1) Service performed in supplying class I milk to the
marketing area in times of short supply;
(2) Service performed in the utilization of milk in times
of long supply in such manner as to insure the greatest
possible return to producers;
(3) Service performed by the maintenance throughout
the year of facilities for handling the seasonable surplus
even though these facilities can be employed only during
the flush season;
(4) Service performed for the market by the employ¬
ment of measures during flush periods of production to
secure the utilization in fluid form of milk near to the
market, and the utilization in manufactured form of milk
produced at the edge of the milkshed, thus reducing trans¬
portation charges which must be shared by all producers;
(5) Miscellaneous services performed for the benefit
of the entire market with respect to weights, tests, market
outlets, etc.
The amendment proposed in section 4 of S. 3426, namely,
part (i) thereof, will make it clear and certain that the
Secretary of Agriculture in his discretion has full power
to fix differentials in favor of cooperative associations
which are rendering these or similar services and which
46
services tend to effectuate the public policy of the Market¬
ing Agreement Act. By the amendment the Secretary will
have authority to fit such payments appropriately to the
value of the service rendered.
It is to be noted further that as a prerequisite to re¬
ceiving any such payment, the cooperative must be bona
fide and under the exclusive control of its member-pro¬
ducers. Furthermore, it must be in full compliance with
all provisions of the marketing order which govern it.”
NOTE There was a further statement on page 27
that the payments would be made out of the settle¬
ment fund under the provisions of 8c(5)(C) of the
Act.
APPENDIX III
Statement of Mr. E. W. Gaumnitz, Director, Division
of Marketing and Marketing Agreements, Agricultural
Adjustment Administration, Department of Agricul¬
ture, at Hearing before Senate Committee on April
1-4, 1940 (pp. 52-53) relating to Sec. 4 of S. 3426.
“Section 4, which also appears on page 4 of the com¬
pilation, amending section 8c(5) (C), recognizes and now
provides specifically that the power to fix minimum prices
to handlers and the manner of making payments to pro¬
ducers can include in the total segregation from the total
value of milk, as fixed by an order, a sum to provide a
reasonable compensation to bona fide producer-owned and
producer-controlled associations for services which they
may render to the entire market, and from which all pro¬
ducers derive benefits. The services for which compen¬
sation may be paid are to be specified by the Secretary, and
thus permit an adaptation of such requirements to a par¬
ticular marketing program and to the character of market¬
ing facilities that may be found in one market, as con¬
trasted with those in another. Such payments and their
continued receipt by a qualified cooperative are condi-
47
tioned upon compliance with the orders applicable to such
receiving association, and thus channels producer money
only to cooperative marketing organizations which are
marketing milk in a manner that will support the entire
marketing program.
This amendment also specifically provides for another
kind of payment, not limited to cooperative associations for
the disposition of surplus fluid milk in flush seasons, and
in the maintenance and release of available supplies in
short seasons, in such a manner as will maintain maximum
stability supply and prices in the market.
In general, the two provisions contained in section 4
supplement each other and together provide a way whereby
all producers who enjoy the benefits of such marketing
also carry a reasonable and proportionate share of the
burden involved. Specific standards are included as a
guide for carrying out its provisions.
Senator Schwellenbach. Now, what, in your experience,
causes you to want that proposal? Why would that pro¬
vision be desirable?
Mr. Gaumnitz. Again it is primarily a matter of at¬
tempting to avoid controversy and litigation. Provisions
similar to that carried in this section have been included
in certain of the milk orders, specifically that for New
York, which was before the Supreme Court, and on which
the Supreme Court ruled favorably. However, it is one
of those provisions that are controversial in character,
and it was thought that the inclusion of a specific author¬
ity might eliminate, in whole or in part, additional litiga¬
tion with respect to the enforcement of marketing agree¬
ments and orders.
Senator Schwellenbach. You mean that the amount
allowed as reasonable is controversial, not the principle
that you should be entitled to fix the reasonable compen¬
sation?
Mr. Gaumnitz. Well, the first question is as to the prin¬
ciple, and it would appear that the court has pretty well
passed on the principle, although it still is a controversial
48
point. The question of reasonableness has not come up
directly.”
APPENDIX IV
Extract trom Report of Committee on Agriculture
and Forestry, Accompanying S.3426 (Report No. 1719,
67th Cong. 3d Sess.) pp. 7-8, as to Section 4 of the Bill.
“Section 4 of the amending bill amends section 8c(5)(C)
of the act by providing specifically for the segregation, from
the total value of milk as fixed by the order, of sums to
provide reasonable compensation for two distinct kinds of
marketing services as indicated in the provisions desig¬
nated as (i) aud (ii). This authority is considered as being
involved in the power to fix minimum prices to handlers
and the manner of making payments to producers already
contained in the act. Hence, the purpose of section 4 is to
establish more explicit standards by which the Secretary
shall be guided in providing for such compensation. Both
types of services are definitely associated with the proper
functioning of an order program and the effectuation of
the policy of the act.
The services for which compensation is authorized by
the provision designated by (i) are of the type regarded
as essential in carrying out the method of payment to pro¬
ducers authorized by paragraphs (B) (ii) and (C) of
subsection (5) of section 8c under the method of pricing
milk to handlers provided in paragraph (A) of the same
sub-section. Authorization of such compensation to be
paid out of any pool or fund established under paragraph
(C) of subsection (5) involves the fundamental principle
that such services be those which are identifiable as benefit¬
ing all producers with a reasonable degree of equality as
distinguished from services, the benefits of which are lim¬
ited primarily to members of a particular cooperative
association. Illustrations of these types of marketing
services are suggested in the amendment itself, but the
49
Secretary is authorized to specify others which may con¬
form to these general principles when necessary to achieve
the same marketing results under circumstances peculiar
to different markets. Because of the nature of such serv¬
ices, compensation with respect thereto is limited to bona
fide cooperative marketing associations, all of whose oper¬
ations are under the full control of milk producers.
The services for which compensation is authorized by
the provision designated by (ii) are in addition to and in
no way a duplication of the services for which compensa¬
tion is authorized under (i). The payments authorized by
(ii) are similar to location differentials now authorized,
having to do with the movement and handling of milk,
and are available to any plant operator, irrespective of
whether or not such operator is also a cooperative asso¬
ciation. This type of allowance is designed to cover costs
involved in the movement of milk from or to processing
plants when marketing conditions are such as to necessi¬
tate such movement in order to maximize returns to all
producers.
Eligibility of an association or operator to receive pay¬
ments authorized by (i) and (ii) from a pool or fund as
established by an order is further conditioned upon com¬
pliance with the applicable provisions of the order. These
two provisions supplement each other and together pro¬
vide a way whereby all producers who enjoy the benefits
of such marketing services also carry a reasonable and
proportionate share of the burden involved.”
Lr O-OP ERAT
ive
INDEX
Page
Jurisdictional Statement . 1
Statement of the Case. 3
Statute and Order Involved. 6
Statement of Points. 6
Summary of Argument. 6
Argument:
I. The payments to co-operative associations of producers
for market-wide services are authorized by section 8c (5)
and section 8c(7) (D) of the statute providing that, in
addition to the enumerated terms, conditions, and adjust¬
ments which may be included in a marketing order, such
additional provisions may be included as are incidental
to, and not inconsistent with, the enumerated terms and
conditions in section 8c(5), and necessary to effectuate
the other provisions of the order. 9
A. The qualified co-operative associations of pro¬
ducers, in engaging in certain activities, includ¬
ing the providing of facilities or other outlets
for surplus milk and in various other respects
advancing the interests of producers in general,
are performing market-wide services, under the
order, for which payment should be made from
the producer-settlement fund under the order... 12
B. The provisions for payments to co-operatives for
market-wide services are not inconsistent with
section 8c(5) of the Act. 25
C. The statute’s terms, purposes, background, and
history indicate that section 8c(7) (D) of the Act
is to be given its plain meaning and to include
payments to co-operative associations for mar¬
ket-wide services whenever there is warrant in
the hearing record . 27
D. The scope of judicial review is limited to the in¬
quiry as to whether substantial evidence in the
hearing record, on which the Secretary’s order
is based, supports the Secretary’s action. There
being no question that substantial evidence sup¬
ports the Secretary’s findings that the order
provisions for payments to co-operatives are in¬
cidental and necessary under section 8c(7) (D)
of the Act, and not inconsistent with section
8a(5), and inasmuch as the appellees failed to
place the entire hearing record before the Court,
the appellees’ attack upon the provisions of the
order must fail. 36
II. The challenged provisions are plainly authorized by the
Act, and the Government’s motion for summary judg¬
ment should have been sustained. 40
(i)
II
Page
Conclusion. 42
Appendix:
Relevant sections of the Agricultural Marketing Agreement
Act of 1937 . 43
Relevant sections of the Boston milk marketing order. 46
CITATIONS
Cases:
American Power d Light Co. v. Securities and Exchange Com¬
mission, 329 U. S. 90. 35
American Sugar Refining Co. v. Louisiana, 179 U. S. 89. 31
Armour dr Co. v. Wantock, 323 U. S. 126. 34
Bailey Farm Dairy Co. v. Anderson (C.A. 8), 157 F. 2d 87. . . . 28, 34
Bailey Farm Dairy Co. v. Jones (D.C. E.D. Mo.), 61 F. Supp.
209 . 34,36
Borden Co. v. Borella, 325 U. S. 679 . 34
Brushaber v. Union Pacific Railroad Co., 240 U. S. 1. 31
Cardillo v. Liberty Mutual Insurance Co., 330 U. S. 469 . 38
Chicago Board of Trade v. Olsen, 262 U. S. 1. 31
Crane v. Commissioner, 331 U. S. 1. 32
Crull v. Wickard (C.A. 6), 137 F. 2d 406 . 36
Dairymens League Co-operative Association, Inc. v. Brannan
(C.A. 2), 173 F. 2d 57. 7
Dobson v. Commissioner, 320 U. S. 489 . 38
Flint v. Stone Tracy Co., 220 U. S. 107. 31
Gemsco, Inc. v. Walling, 324 U. S. 244 . 33, 34
George Moore Ice Cream Co. v. Rose, 289 U. S. 373. 29
Gray v. Powell, 314 U. S. 402 . 37, 38
Green Valley Creamery v. United States (C.A. 1), 10S F. 2d
342 . 26
Hood dr Sons v. DuMond, 336 U. S. 525. 28
H. P. Hood dr Sons v. United States, 307 U. S. 588.4,8,13
Hughes v. Securities and Exchange Commission (C.A. D.C.)
174 F. 2d 969. 37
In re Marketing Association of Fort Wayne, Inc. (D.C. D.
Ind.), 8 F. 2d 626. 31
Interstate Commerce Commission v. Jersey City, 322 U. S.
503 . 37
Interstate Commerce Commission v. Union Pacific R. Co.,
222 U. S. 541. 37
Jones v. Liberty Glass Co., 332 U. S. 524. 32
Liberty Warehouse Co. v. Burley Tobacco Growers Co-operative
Marketing Association, 276 U. S. 71. 31
National Labor Relations Board v. Hearst Publications, 322
U. S. Ill .11,38,39
National Labor Relations Board v. Nevada Copper Corp., 316
U. S. 105. 38
National Labor Relations Board v. Southern Bell T. dr T. Co.,
Nebbia v. New York, 291 U. S. 502. 37
Ill
Cases—Continued
Page
New York State Guernsey Breeders’ Co-operative Association
v. Wickard, (C.A. 2), 141 F. 2d 805. 30
Parker v. Motor Boat Sales, Inc., 314 U. S. 244.. 38
People v. Teuscher, 248 N. Y. 454 . 31
Porter v. Murray (C.A. 1), 156 F. 2d 781. 33
Puerto Rico v. Shell Co., 302 U. S. 253. 12
Queensboro Farms Products Inc. v. Wickard (C.A. 2), 137 F.
2d 969 . 6,9,10,11,36,40
Rochester Telephone Corp. v. United States, 307 U. S. 125. ... 38
Securities and Exchange Commission v. C. M. Joiner Leasing
Corp., 320 U. S. 344 . 32
Shapiro v. United States, 335 U. S. 1. 36
Shields v. Utah Idaho Central R. Co., 305 U. S. 177. 37
Sioux Tribe of Indians v. United States, 316 U. S. 317. 33
South Chicago Coal & Dock Co. v. Bassett, 309 U. S. 251. 11, 38
Stark v. Wickard, 78 App. D. C. 44,136 F. 2d 786. 2
Stark v. Wickard, 321 U. S. 288. 2, 3,4, 7,15,16
Sunshine Anthracite Coal Co. v. Adkins, 310 U. S. 381. 35
Swayne & Hoyt v. United States, 300 U. S. 297. 38
Thompson v. Consolidated Gas Utilities Corp., 300 U. S. 55... 9,40
Titusville Dairy Products Co. v. Brannan (C.A. 3), 176 F. 2d
332 . 36
United States v. American Trucking Association, 310 U. S. 534. 11
United States v. Dotterweich, 320 U. S. 277. 28
United States v. Ridgeland Creamery Co. (D.C. W.D. Wise.),
47 F. Supp. 145. 34
United States v. Rock Royal Co-operative, Inc., 307 U. S.
533 . 7, 8 , 9,10,12,30,31,40
United States v. Ruzicka, 329 U. S. 287. 37
Vcrmilya-Brown Co. v. Connell, 335 U. S. 377. 11
Victor Mfg. & Gasket Co. v. National Labor Relations Board
(C.A. 7), 174 F. 2d 867. 37
Waddington Milk Co. v. Wickard (C.A.2), 140 F. 2d 97. 36
Wallace v. Hudson-Duncan <& Co. (C.A. 9), 98 F. 2d 985 . 9,40
Wawa Dairy Farms v. Wickard (C.A. 3), 149 F. 2d 860. 36,40
Wetmiller Dairy & Farm Products, Inc. v. Wickard (C.A. 2),
149 F. 2d 330. 36
Statutes and Orders:
Act of July 3, 1948, c. 827, 62 Stat. 1258, 7 U.S.C. Supp. II,
672. 22
Agricutural Marketing Act, 1931, 21 and 22 -Geo. 5 c. 42, $ 6
(Vol. 1 , Halsbury’s Statutes of England, 2 d ed., p. 243)_ 35
Agricultural Marketing Act of June 15, 1929, 46 Stat. 18, 12
U.S.C. 1141 . 30
Agricultural Marketing Agreement Act of 1937, c. 296, 50 Stat.
246, 7 U.S.C. 601 et seq. 2 ,6
Section 2 ( 1 ) . ’9
Section 8 c(3) . 20
Section 8 c (4) . 20
Section 8 c (5) . 4,7,9,10,11,15, 23,25, 26,27,28,29,36,39
IV
Statutes and Orders—Continued _
Page
Section 8c(7)(D) . 4,7,10,11,26,27,28,29,36
Section Sc(8) . 10
Section 8c(9) . 5,10
Section Sc(B) . 28,29
Section 8c (15) . 36
Section 8c(18) . 9
Section 10(b)(1) . 30
Boston Milk Order. 1, 3,5, 6,18, 21,23,25,26
Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. 291. 30
Clayton Act, 3S Stat. 730,15 U.S.C. 17. 30
Commodity Exchange Act, 49 Stat. 1491, 7 U.S.C. 10a. 31
Louisville Milk Order. 34
New York Milk Order.5,21,25,34
Public Utility Holding Co. Act of 1935 . 35
Reorganization Act of 1945, 5 U.S.C. I33y et seq . 5
Robinson-Patman Act, c. 592, 49 Stat. 1528, 15 U.S.C. 13b.. 30
St. Louis Milk Order . 34
Miscellaneous:
Black, The Dairy Industry and the AAA (The Brookings In¬
stitution, 1935) . 14
Cassels, A Study of Fluid Milk Prices (Harvard Economic
Studies, 1937) . 13
Cooperative Marketing of Dairy Products (Farm Credit Ad¬
ministration, by Harry C. Trelogan and French H. Hyre,
June 1939) . 22
S6 Cong. Rec. 12256 . 33
86 Cong. Rec. 12258-12259 . 33
86 Cong. Rec. 12266. 33
Federal Rules of Civil Procedure. 5
Gaumnitz and Reed, Some Problems Involved in Establishing
Milk Prices (U. S. Department of Agriculture, 1937). 13
Hearings, Subcommittee of Senate Committee on Agriculture
and Forestry on S. 3426, 76th Cong., 3d Sess.. 33
Lininger, Dairy Products under the Agricultural Adjustment
Act (The Brookings Institution, Pamphlet Series No. 13).... 14
Milk Report of Reorganization Commission for Great Britain
(Ministry of Agriculture and Fisheries, Economic Series
No. 44) . 35
New England Dairyman.22,23
Nourse, (Director of the Institute of Economics, Brookings In¬
stitution), American Cooperation, 1934 . 30
Nourse, Marketing Agreements under the AAA (Brookings In¬
stitution, 1935) . 13
Nourse, The Legal Status of Agricultural Cooperation (The In¬
stitute of Economics, 1927). 31
Our Milk. 23
Report of the Federal Trade Commission on the Distribution
and Sale of Milk and Milk Products (74th Cong., 2d Sess.,
H. Doc. No. 501). 13
Report of the Ontario Royal Commission on Milk, 1947. 14
S. 3426, 76th Cong., 3d Sess. 32
Seasonality of Milk Deliveries in the Boston Milkshed (U. S.
Department of Agriculture, Bureau of Agricultural Eco¬
nomics, June 1949). 13
V
Miscellaneous—Continued
Page
Sommer, Market Milk (2d ed. 1946). 13
The Dairy News. 23
The Louisville Fall-Premium Plan for Seasonal Milk Pricing
(Kentucky Agricultural Experiment Station, University of
Kentucky) . 34
The Maine Milk Producer . 23
®mteb States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
October Term, 1949
Nos. 10,365 and 10,366
Charles F. Brannan, Secretary of Agriculture,
APPELLANT
v.
Delbert 0. Stark, A. F. Stratton, A. R. Denton,
G. Stebbins, and F. Walsh, appellees
Dairymen’s League Co-operative Association, Inc.,
APPELLANT
V.
Delbert 0. Stark, A. F. Stratton, A. R. Denton,
G. Stebbins, and F. Walsh, appellees
ON APPEAL FROM A JUDGMENT OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
BRIEF FOR THE SECRETARY OF AGRICULTURE,
APPELLANT
JURISDICTIONAL STATEMENT
<
This action was instituted as a class action by five dairy
farmers to enjoin the Secretary of Agriculture from mak¬
ing certain payments to co-operative associations of pro¬
ducers pursuant to the Boston milk marketing order (7
o
CFR, 1941 Supp., 904.1 et seq.)> effective under tlie Agri¬
cultural Marketing Agreement Act of 1937 (Act of June
3, 1937, c. 296, 50 Stat. 246, 7 U. S. C. 601 et seq.). The
complaint alleges that the payments to the co-operative
associations of producers are not authorized by the stat¬
ute. The suit was dismissed by the District Court of the
United States on the ground that the Act vests no legal
cause of action in milk producers, as contradistinguished
from milk handlers who are regulated by the order, and
its judgment was affirmed by the United States Court of
Appeals for the District of Columbia. Stark v. Wickard,
78 App. D. C. 44, 136 F. 2d 786. That decision, however,
was reversed in Stark v. Wickard, 321 U. S. 288, by the hold¬
ing that dairy farmers, as plaintiffs, “have legal standing
to object to illegal provisions of the Order,” and the Dis¬
trict Court was directed in the remanding of the case to con¬
sider, in the judicial examination of the complaint, “the
soundness of the allegations made by the petitioners in their
complaint,” and “whether the statutory authority given the
Secretary is a valid answer to the petitioners’ contention.”
The District Court -was of the opinion (Joint App. 142-
150) in the reconsideration of the case that the statute does
not depute authority to the Secretary to include in a milk
marketing order any of the challenged provisions for pay¬
ments for market-wide services rendered by the co-opera¬
tive associations, and the court entered judgment (Joint
App. 154-155) on April 25, 1949, enjoining the Secretary
from making further payments, under the Boston milk
marketing order, to co-operative associations of producers.
The effectiveness of the judgment was stayed by the Dis¬
trict Court (Joint App. 156-157) on condition that all such
payments should be held in escrow pending the final dis¬
position of the case on appeal.
The opinion of the court below is officially reported in
82 F. Supp. 614, and the opinion also appears in the Joint
Appendix, pp. 142-150. The notice of appeal was filed
(Joint App. 157) on June 21, 1949, by the defendant, the
Secretary of Agriculture. The intervenor-defendant, the
Dairymen’s League Co-operative Association, Inc., filed
3
notice of appeal (Joint App. 157-158) on June 21, 1949.
The jurisdiction of this Court is invoked under Title 28,
United States Code, 1291 and 1294.
STATEMENT OF THE CASE
The complaint alleges (Joint App. 6) that there is no
statutory authorization for the provisions in the Boston
milk order providing for payments to co-operative associa¬
tions of producers for services rendered to the market as
a whole, and that such provisions in the order are, therefore,
‘ 4 without legal authority, and are unlawful and void. ” It is
further alleged (Joint App. 2) in the complaint that the
appellees’ milk is distributed in the Boston marketing area,
as defined in the order, and that in the operation of the
market-wide pool all producers receive a uniform blended
price per hundredweight for milk based upon the market¬
wide utilization of the milk, and it is averred that the uni¬
form blended price is illegally decreased by virtue of the
deduction, from the pool, of the payments made to the co¬
operative associations of producers. The complaint asks
that the provisions in the order for payments to co-opera¬
tive associations of producers be declared illegal and void,
and that such payments under those provisions be enjoined.
The only question resolved by Stark v. Wickard, 321 U. S.
288, is that the dairy farmers—even though not regulated
under the order—who instituted this action have such a legal
interest in the producer-settlement fund as entitles them to
challenge the action of the Secretary in directing the dis¬
bursements, from such fund, to co-operative associations of
producers. In deciding that the persons who instituted this
action have such an interest as justifies judicial considera¬
tion, the Court stated (321 U. S. 311), in reversing and
remanding the case, that:
“It hardly need be added that we have not considered
the soundness of the allegations made by the petitioners
in their complaint. The trial court is free to consider
whether the statutory authority given the Secretary
is a valid answer to the petitioners’ contention. We
merely determine the petitioners have shown a right
to a judicial examination of their complaint.”
4
The appellees assert that the only issue is one of “statu¬
tory power to make the deduction required by Order, § 904.9,
under the authority of §8c(7)(D) of the Act.” Stark v.
Wkkard, 321U. S. 28S, 307. The Act provides that milk mar¬
keting: orders may contain one or more of the terms and con¬
ditions expressly set forth in § 8c(5) of the Act and, in addi¬
tion to the enumerated terms and conditions of § 8c(5), an
order may contain such provisions as are “incidental to,
and not inconsistent with, the terms and conditions speci¬
fied in subsections (5), (6), and (7) [of § 8c of the Act] and
necessary to effectuate the other provisions of such order.”
Because the Congress could not foresee every contingency
in this field in which “the economy of the industry is so
eccentric that economic controls have been found at once
necessary and difficult,” 1 it did not set forth in the Act
minute formularies which leave no option and permit no
latitude. On the contrary, the “terms of the Order are
largely matters of administrative discretion” and the tech¬
nical details “are left to the Secretary and his aides.”
Stark v. Wickard, 321 U. S. 288, 310.
The provisions of the order 8 for payments to co-operative
associations of producers for services rendered to the mar¬
ket as a whole were included by amendment to the order,
effective August 1, 1941. These provisions in the amended
order are based on evidence adduced at a public hearing,
and the findings of fact -were made (7 CFR, 1941 Supp.,
904.0) by the Secretary that (1) the payments to co-opera¬
tive associations of producers for market-wide services are
incidental to, and not inconsistent with, the terms and con¬
ditions in § 8c(5) of the Act, and such payments to the co¬
operative associations of producers are necessary to effec-
1 The quotation is from Hood & Sons v. DuMond, 336 U.S. 525,
529.
2 Section 904.9 of the order, as amended on August 1, 1941, con¬
tains the provisions (7 CFR, 1941 Supp., 904.9), asserted to be
illegal. These provisions in the order were amended, in various
respects, on August 1, 1947, and the section number was changed
to 904.10 (7 CFR, 1947 Supp., 904.10). The plaintiffs’ complaint
was amended (Joint App. 132) so as to apply to the order as
amended on August 1, 1947.
5
tuate the other provisions of the amended order; (2) the
minimum prices provided for by the amended order are
necessary to effectuate the declared policy of the Act, i.e.,
to insure, in the public interest, a sufficient quantity of pure
and wholesome milk; and (3) the amended order, and all
of its terms and conditions, will tend to effectuate the de¬
clared policy of the Act. These findings by the Secretary,
on the basis of the hearing record, were approved by the
President in accordance with §8c(9) of the Act. 3 The
appellees do not assert any lack of substantial evidence
to support the foregoing findings by the Secretary, but the
appellees contend that, as a matter of statutory interpre¬
tation, the Act does not authorize the challenged provisions
in the order.
The New York milk order (7 CFR, 927.1 et seq.) contains
provisions for payments to co-operative associations of
producers, for market-wide services; and the Dairymen’s
League Co-operative Association, Inc., a qualified co-opera¬
tive for payments under the New York milk order, inter¬
vened as a party defendant. The application for interven¬
tion was approved by the District Court under Rule 24(b)
of the Federal Rules of Civil Procedure (28 U.S.C. follow¬
ing 723c) on the basis that the claim of the Dairymen’s
League Co-operative Association, Inc., for payments under
the New York milk order is “in common” with the issue
involved in this case as to the statutory authority for
similar payments under the Boston milk order. The in-
tervenor-defendant appealed from the judgment of the
District Court, and asserts that its interests are adversely
affected by the judgment of the lower court that there is
no statutory authorization for payments to co-operative
associations of producers for market-wide services.
3 Acting pursuant to the Reorganization Act of 1945 (5 U.S.C.
133y et seq.), the President abolished, by § 102 of the “Reorganiza¬
tion Plan No. 1 of 1947,” the function of the President with respect
to approving determinations of the Secretary of Agriculture in con¬
nection with the issuance of marketing orders under the Act. 93
Cong. Rec. 4488-89 (1947), 4510-12 (1947); 12 F.R. 4535; and
5 U.S.C. Supp. II 133y-16. The Reorganization Plan No. 1 of
1947 became effective on July 1, 1947.
6
STATUTE AND ORDER INVOLVED
The relevant parts of the Agricultural Marketing Agree¬
ment Act of 1937 (Act of June 3, 1937, c. 296, 50 Stat. 246,
7 TJ.S.C. 601 et seq.), and the Boston milk marketing order,
as amended (6 F.R. 3762, 5481, 7 CFR, 1941 Supp., 904.0
et seq.; and 12 F. R. 4921, 7 CFR, 1947 Supp., 904.0 et seq.),
are set forth in the Appendix to this brief, infra, pp. 43-49.
STATEMENT OF POINTS
I
The provisions in the Boston milk marketing order, as
amended, providing for payments to the co-operative asso¬
ciations of producers for market-wide services are within
the statutory authority conferred on the Secretary of Agri¬
culture by the Agricultural Marketing Agreement Act of
1937, as amended (7 U.S.C. 601 et seq.). The District Court
erred, therefore, in adjudging that those provisions of the
amended order are not authorized by the Act, and the
District Court was in error in enjoining the Secretary from
making the payments to the co-operative associations of
producers as provided for in the amended order.
II
Inasmuch as the provisions in the Boston milk marketing
order, as amended, for payments to the co-operative asso¬
ciations of producers, for market-wide services, are au¬
thorized by the Act, the motion for summary judgment
filed by this appellant (Joint App. 58-59) on October 2,
1946, should have been sustained by the District Court.
The action of the District Court in denying the motion for
summary judgment was reversible error.
SUMMARY OF ARGUMENT
The “exquisitely complicated” 4 nature of milk market-
4 The quotation is from Queensboro Farms Products, Inc., v.
Wickard (C.A. 2), 137 F. 2d 969, 974, with respect to the com¬
plexities of milk marketing in general, and in particular in the
New York metropolitan milk marketing area.
7
ing and tlie “monstrous difficulty” 5 of regulation are such
that the Congress provided that, in addition to specified
terms and conditions to be included in a milk marketing
order and “adjustments” which may be made, such auxil¬
iary provisions may be included under § 8c(5) and §8c(7)
(D) of the Act as are “incidental . . . and necessary to
effectuate the other provisions of such order.” United
States v. Rock Royal Co-operative, Inc., 307 U. S. 533, 575.
In issuing the amended Boston milk order, effective August
1, 1941, the Secretary made findings of fact (7 CFR, 1941
Supp., 904.0), on the basis of the evidence in the hearing
record, that the payments to the co-operative associations
of producers for market-wide services are incidental and
necessary, under §8c(7)(D) of the Act, to effectuate the
provisions in the order included under §8c(5) of the Act,
and that such payments to co-operatives for market-wide
services are not inconsistent with § 8c(5) of the Act. The
appellees do not contend that there is an absence of sub¬
stantial evidence to support the findings by the Secretary,
but it is asserted by the appellees that the statutory author¬
ization for “incidental . . . and necessary” provisions
cannot, as a matter of law, include provisions for payments
to co-operatives for market-wide services.
The provisions in a milk order “are largely matters of
administrative discretion.” Stark v. Wickard, 321 U S.
288, 310. There is nothing in the statute’s background,
terms, or purposes to indicate that the term “incidental
. . . and necessary” is to be regarded as a term of art
having, as a matter of law, a definite and circumscribed
meaning so that its application, irrespective of the facts, is
to be ascertained in vacuo. 6 This statutory authorization
is to be applied in the light of the mischief to be corrected
and the economic goal to be attained, and a provision found
by the Secretary, on the basis of the hearing record, to be
5 The quotation is from Dairymen’s League Co-operative Asso¬
ciation, Inc. v. Brannan (C.A. 2), 173 F. 2d 57, 66, the opinion of
the Court being by Judge Learned Hand.
6 The statute expressly prohibits certain provisions, but does not
prohibit payments to co-operatives for market-wide services.
Exceptions set forth in detail are not to be enlarged by implication.
8
incidental and necessary is to be tested by whether the find¬
ings have warrant in the evidence. The findings by the
Secretary and the challenged provisions in the amended
order are within the plain provisions of the Act. It must be
assumed that Congress evidently meant what the plain
terms of the Act ordinarily convey. 7
The co-operatives who qualify for these payments per¬
form market-wide services in connection with the handling
of surplus milk, market-wide services in connection with
the formulation of data and representation of the interests
of producers in general at public hearings, from time to
time, and in the dissemination of information and data to
producers necessary to effectuate the classification, pooling,
and pricing provisions of the order.
The problem of disposing of surplus milk has plagued the
Boston and New York markets for a long period. Nebbia
v. New York, 291 IT. S. 502, 517-518; United States v. Rock
Royal Co-op. Inc., 307 U. S. 533, 549-550; and II. P. Hood
<£ Sons v. United States, 307 U. S., 588, 593. The production
of milk is much greater in the spring and summer than
during the remainder of the year; the number of cows
necessary to produce enough fluid milk to meet the require¬
ments during the period of short supply will produce a
much greater amount in the spring and early summer
months. The milk order does not require a handler to accept
any or all milk offered to him by a producer. The blended
price which a handler must pay under the order is, there¬
fore, inapplicable to surplus milk for which a producer
can find no handler who is willing to purchase.
The co-operatives who qualify for payments under the
order perform market-wide services in finding outlets for
this surplus milk—outlets on the fluid milk market, if pos¬
sible, and at least outlets in manufacturing channels. All
producers—and not merely members of the co-operatives—
are benefited by the market-wide services by the co-opera-
7 Moreover, the Act requires the Secretary to accord such en¬
couragement to co-operatives as will be consonant with the liberal
policy towards co-operatives set forth in many Congressional enact¬
ments.
9
tives with respect to surplus milk, and also relative to the
various other respects in which the co-operatives advance
the interests of the producers in general. The Secretary
maintains close supervision with respect to these services,
and the payments to a co-operative are suspended whenever
there is “reason to believe” that the co-operative is no
longer performing the market-wide services. 7 CFR, 904.10
and 927.9(f).
Assuming, arguendo, that the appellees can and do attack
the provisions in the order as not being based on substantial
evidence, the attack must fail because the hearing record
on which the present provisions are based is not before
this Court. The order was again amended with respect to
payments to co-operatives on August 1,1947, and no part of
that hearing record was ever introduced in this litigation by
the appellees. The predicative findings of the Secretary, in
issuing these amendments effective August 1, 1947, carry
a presumption of the existence of a state of facts justifying
the action. United States v. Rock Royal Co-operative, Inc.,
307 U. S. 533, 567-568; Thompson v. Consolidated Gas
Utilities Corp., 300 U. S. 55, 69; Wallace v. Hudson-Duncan
& Co. (C.A. 9), 98 F. 2d 985; and Queensboro Farms Prod¬
ucts, Inc. v. Wickard (C.A. 2), 137 F. 2d 969, 977-981.
ARGUMENT
I. The Payments to Co-operative Associations of Pro¬
ducers for Market-Wide Services are Authorized by Sec¬
tion 8c(5) and Section 8c(7) (D) of the Statute Providing
That, in Addition to the Enumerated Terms, Conditions,
and Adjustments Which may be Included in a Marketing
Order, Such Additional Provisions may be Included as are
Incidental to, and not Inconsistent with, the Enumerated
Terms and Conditions in Section 8c(5), and Necessary to
Effectuate the Other Provisions of the Order.
The Act plainly sets forth the purpose of milk orders, 8
8 Sections 2(1) and 8c (18) of the Act (7 U.S.C. 602(1) and
608c(18)).
10
prescribes the manner in which the orders may be issued, 9
and outlines the terms and provisions which the orders may
contain. 10 The order may contain the terms or conditions
enumerated in § 8c(5) of the Act and, in addition, such pro¬
visions under § Sc (7) (D) of the Act as are “incidental to,
and not inconsistent with, the terms and conditions speci¬
fied in subsections (5), (6), and (7) [of § 8c of the Act]
and necessary to effectuate the other provisions of such
order.” Congress did not attempt to limit the regulatory
provisions to terms of classification, pooling, and pricing
set forth in § 8c(5) of the Act; the statutory provision in
§ 8c(5) is plain that orders may contain one or more of
the terms and conditions in § 8c(5), “and, except as pro¬
vided in subsection (7) [of § 8c], no others.” (Emphasis
supplied.) It was stated in United States v. Rock Royal
Co-operative, Inc., 307 U. S. 533, 576, in reviewing the pro¬
visions of the Act and sustaining its constitutionality, that
§ 8c(7)(D) of the Act permits the inclusion of “pro¬
visions auxiliary to those definitely specified.”
The Congress was not seeking to solve the harassing eco¬
nomic problems, with which the statute deals, by solutions
rigidly limited to a code of specifics. The Act authorizes
“incidental . . . and necessary” provisions to effectuate
the terms and conditions expressly mentioned in the Act. 11
The “exquisitely complicated” field of milk marketing
(Queensboro Farms Products, Inc. v. Wickard (C.A. 2),
137 F. 2d 969, 974) is such that to counteract the virulent
effects of disorderly marketing the “incidental . . . and
necessary” authorization calls for a continuous process of
application; it cannot be reduced to formula, for relevancy
and adequacy are matters variable in relation to the diver¬
gent, unstable, and mutable situations within the purposes
and scope of the program. “The background and legisla-
9 Sections 8c(3), 8c(4), 8c(5), 8c(8), and 8c(9) of the Act
(7 U.S.C. 608c(3), 608c(4), 608c(5), 608c(8), and 608c(9)).
10 Sections 8c (5) and 8c (7) of the Act (7 U.S.C. 608c (5) and
608c (7)).
11 The provisions in the order for payments to co-operatives are
“not inconsistent” with the terms and provisions in the Act. This is
dealt with, infra, pp. 25-27.
11
tive history of this legislation [the Act nnder which the milk
orders are effective] leave no donbt that Congress gave
the Secretary broad discretion inj its administration.”
Queensboro Farms Products, Inc. v. Wickard (C.A. 2),
137 F. 2d 969, 977.
In issuing the amended order, effective August 1, 1941,
the Secretary made findings of fact (7 CFR, 1941 Supp.,
904.0), on the basis of the evidence in the hearing record,
that the payments to the co-operative associations of pro¬
ducers for market-wide services are incidental and neces¬
sary, under § 8c(7) (D) of the Act, to effectuate the provi¬
sions in the order included under § 8c(5) of the Act, and
that such payments to co-operatives are not inconsistent
with § 8c(5) of the Act. The appellees do not question
the adequacy of the evidence to support the findings, but
contend that, as a matter of law, the statutory term “inci¬
dental . . . and necessary” cannot be said to include
market-wide services by co-operatives even though such
market-wide services are found to be necessary to effectuate
the other provisions of the order.
The various terms in the amended order reveal and give
confirmation as to the necessity, in the light of the purpose
of the regulatory program, for including the provisions for
payments to the co-operative associations of producers who
perform services for the market as a whole. These pro¬
visions, limned against the whole background of the statute
and the order, are plainly authorized by § 8c(7) (D) of the
Act as “incidental to . . and necessary to effectuate
the other provisions of such order.” The words of the
Act are to be construed if reasonably possible to effectuate
the intent of the lawmakers; and this meaning in particular
instances is to be arrived at not only by a consideration of
the words themselves, but by considering, as well, the pur¬
poses of the law, and the circumstances under which the
words were employed. V ermilya^Brown Co. v. Cormell,
335 IT. S. 377, rehearing denied, 336 U. S. 928; National
Labor Relations Board v. Hearst Publications, 322 U. S.
Ill; United States v. American Trucking Association, 310
U. S. 534; South Chicago Coal & Bock Co. v. Bassett, 309
12
U. S. 251; and Puerto Rico v. Shell Co., 302 U. S. 253, 258.
The economic objective of these regulatory programs was
modified, in some respects, by the Act of July 3, 1948, c.
827, 62 Stat. 1258, but the Congress provided in title III,
§ 302(e), of the enactment (7 U. S. C. Supp. II, 672) that all
programs presently in effect ‘‘shall continue in effect with¬
out the necessity for any amendatory action. ”
A. The Qualified Co-operative Associations of Producers,
in Engaging in Certain Activities, Including the Providing
of Facilities or Other Outlets for Surplus Milk and in Vari¬
ous Other Respects Advancing the Interests of Producers
in General, are Performing Market-Wide Services, Under
the Order, for Which Payment Should he Made From the
Producer-Settlement Fund Under the Order.
‘‘The fluid milk industry is affected by factors of insta¬
bility peculiar to itself which call for special methods of
control.” Nehbia v. New York, 291 U. S. 502, 517. The
economic imbalances in the production and marketing of
milk, even under normal conditions, prevent the adjustment
of supply and demand. United States v. Rock Royal Co-o-p.
Inc.. 307 U. S. 533,549. In view of the well-known variations
in demand and in the volume of milk produced—particularly
the seasonal oscillation in production—it is necessary, in
order to avoid shortages during some of the time, that the
supply should at all times exceed the minimum requirements
of the fluid milk market. The reserve or surplus must be
maintained to insure a sufficient and regular supply to the
fluid milk market.
Whatever the minimum safety margin may be, it would
not be possible to maintain that minimum in winter without
exceeding it in summer, owing to the seasonal variation in
milk production. The biological nature of milk production
is such that it cannot be controlled with precision; and milk,
in view of its highly perishable and bulky nature, cannot be
satisfactorily stored for long periods of time. The number
of cows necessary to produce enough fluid milk to meet the
requirements of the market during the fall and winter
months will produce a much greater amount in the spring
13
and early summer months. 1 " “Under the best practicable
adjustment of supply to demand, the [fluid milk] industry
must carry a surplus of about 20 percent.” Nebbia v. New
York, 291 U. S. 502, 517. This is sometimes referred to as
the “necessary surplus.” 13
The surplus milk produced for, but not disposed of on,
the fluid milk market is generally marketed—if marketed
at all—in manufacturing outlets for milk products in com¬
petition with milk produced elsewhere for manufacturing
purposes. To produce and handle milk in accordance with
the elaborate precautions (Sommer, Market Milk, (2d ed.
1946) pp. 116-121 and 211-243) required by the health au¬
thorities for milk marketed as fluid milk is far more expen¬
sive than to produce milk just for manufacturing purposes.
Surplus milk produced for the fluid milk market but dis¬
posed of to manufacturers must be sold at a price sub¬
stantially lower than the price received on the fluid milk
market. 14 In the absence of regulation, the pressure of
12 The production of milk in June in the Boston milkshed is
almost twice as much as in November (Joint App. 229). The
demand for fluid milk, however, is relatively stable throughout the
year. Handlers usually keep on hand, or at least available, a supply
slightly in excess of their average daily demand for fluid milk.
This operating reserve may be distinguished from the far greater
surplus which arises from the large seasonal increases in produc¬
tion, in the spring and early summer.
13 The surplus milk problem exists in the Boston market the
same as in the New York market. H. P. Hood & Sons v. United
States, 307 U.S. 588, 593. See, also, Report of the Federal Trade
Commission on the Distribution and Sale of Milk and Milk
Products (74th Cong., 2d Sess., H. Doc. No. 501), pp. 13-44;
Nourse, Marketing Agreements under the AAA (Brookings Institu¬
tion, 1935), pp. 200-201; and Gaumnitz and Reed, Some Problems
Involved in Establishing Milk Prices (U.S. Department of Agricul¬
ture, 1937), pp. 53 et seq.; and Cassel’s, A Study of Fluid Milk
Prices (Harvard Economic Studies, 1937), pp. 242 et seq. In
recent years the Boston market has not been able to obtain enough
milk, from its milkshed, to meet the market demands for fluid
milk during the fall and winter months, although on “an annual
basis, even in recent years, the supply from the Boston milkshed
has greatly exceeded the requirements for fluid milk." Seasonality
of Milk Deliveries in the Boston Milkshed (U.S. Department of
Agriculture, Bureau of Agricultural Economics, June 1949) p. 2.
14 “It costs him [the producer] as much to produce and transport
[the surplus milk] as the milk he sells at the standard fluid milk
14
unrestricted competition tends to compel those engaged in
handling milk to attempt to shift the burden of the surplus
to others. A producer or handler with surplus milk may be
constrained to make desperate efforts to dispose of it on
the fluid milk market, or at least find some outlet for it, and
this precipitates retaliatory efforts by competitors with the
result that eventually disorderly marketing conditions re¬
dound to the detriment of producers, handlers, and con¬
sumers. The disorderly marketing of milk, with the in¬
evitable disintegrating effect on the dairy industry, results
eventually in a lowering of quality in milk because of en¬
forced relaxation of safeguards in the production and
distribution of milk, a curtailment in the supply of milk,
and interruptions due to strikes and disorders. This has
been the history of milk marketing in the Boston and New
York milksheds; the problem of the surplus has plagued
these two milk markets for decades, 15 and has been the
subject of many public investigations. Black, The Dairy
Industry and the AAA (The Brookings Institution, 1935),
pp. 182-210.
There is complete homogeneity of the entire supply of
milk approved by the health authorities for fluid use as milk
in the Boston marketing area. That situation applies like¬
wise with respect to milk approved for the New York
metropolitan marketing area. This homogeneity of the milk
supply for the respective marketing areas is illustrated by
the hypothetical example: If the total approved supply,
for one of these marketing areas, were received at a single
plant and the fluid milk market in that area utilized only
75 percent of the total approved supply, there could be no
discernible basis for selecting one producer’s milk rather
price, and if the market for fluid milk cannot absorb it he must
sell it, if possible, as surplus milk. If he is not able to sell it, it is
a dead loss apart from the use to which he can put it on his own
farm. If he can sell it, he sells it at what is known as the secondary
price -which . . . is . . . less than the prevailing price for fluid
milk consumed as such.” Report of the Ontario Royal Commission
on Milk, 1947 (by the Honorable Dalton C. Wells, a Justice of the
Supreme Court of Ontario), p. 60.
15 Lininger, Dairy Products Under the Agricultural Adjustment
Act (the Brookings Institution, Pamphlet Series No. 13) p. 3 et seq.
15
than that of another for shipment to the fluid milk market,
nor could one producer’s milk be distinguished from that of
another. All of the milk in that case would be equally avail¬
able for the fluid milk market. The burden of the surplus
should, therefore, be shared equitably by all of the pro¬
ducers. “It is apparent that serious inequities as among
producers might arise if the prices each received depended
upon the use the handler might make of his milk; accord¬
ingly, §8c(5)(B) [of the Act] authorizes provision to be
made for the payment to producers of a uniform price for
the milk delivered irrespective of the use to which the milk
is put by the individual handler.” Stark v. Wickard, 321
U. S. 288, 295. If the milk is priced to producers on a use
basis, tbe price should be the weighted average of the prices
in the classes in which the milk is utilized. If all producers
do not share equitably in the marketing of the milk, pro¬
ducers discriminated against seek to establish a different
or direct outlet to fluid milk users, and by that method, the
history of each market shows, disorderly marketing condi¬
tions are eventually engendered.
In a market with as high a degree of specialization as
exists in the Boston or New York milksheds, all of the
approved milk is not, of course, physically intermingled,
but all of it is equally available for sale in the respective
marketing area just the same as if the total supply were
physically intermingled. In view of these circumstances,
facilities must be provided for handling the inevitable
excess in periods of surplus production, and for an
equitable sharing of the burden of the surplus. The usual
classification, pooling, and pricing provisions of the order
are not enough, in the Boston and New York markets, to
bring about the necessary equitable sharing of the surplus
load to effectuate the purpose of the Act.
The milk order does not require a handler to accept
delivery of milk from a producer or, if the milk is accepted,
to utilize the milk for disposition as fluid milk, i.e., in the
higher classification. In some instances, it may be more
profitable to the handler, although not more profitable to
the producers, to utilize the milk in a lower class. The
16
handlers are free to accept or decline to receive milk; and
the handlers are free to dispose of the milk as they see fit.
The classification, pooling, and pricing provisions—without
the incidentally necessary provisions for market-wide
services by cooperative associations of producers—relate
to the calculus of price. As explained in Stark v. Wickard,
321 U. S. 288, 296-301, the Boston milk order provides for
a market-wide pool which is an equalization method under
which the individual producer is paid for the milk which
he sells to a handler in accordance with the use made of all
the milk sold in the market, rather than the use made of
the individual producer’s milk or the use made of all the
milk of a particular handler. The blended or uniform
price is computed, in the case of this market-wide equaliza¬
tion pool, by multiplying the amount of all the milk in the
market disposed of for fluid or Class I purposes by the
Class I price, and the amount of all the milk disposed of in
the market for manufacturing or Class II purposes by the
Class II price, and then by dividing the sum of the two
resulting figures—less certain deductions, including pay¬
ments to the co-operatives ,a —by the total amount of milk
disposed of in the market. Stark v. Wickard, 321 U. S. 288,
298-301. In effect, the order treats the milk of all pro¬
ducers, engaged in the production of milk for the Boston
marketing area, as if commingled in a common supply reser¬
voir from which the various handlers can purchase milk and
pay the producers the minimum blended price fixed by the
order.
The blended price under the order has no relevancy or
application to surplus milk for which a producer can find
no market; the order is applicable only to milk that handlers
are willing to accept from producers. Moreover, the
blended price is a lower price or a higher price depending
on the market-wide utilization of the milk by the handlers,
i.e., whether it is utilized on the fluid milk market at the
Class I price or on the manufacturing market at the Class II
price. These significant circumstances are factors that,
16 The order requires several deductions for purposes admittedly
authorized by the Act. Stark v. Wickard, 321 U.S. 288, 300.
17
unless otherwise dealt with in the order, hinder or prevent
the effectuation of the classification, pooling, and pricing
provisions in the order. These facts are such that if
orderly marketing is to be established so as to attain the
economic objective of the Act—i.e., to insure, in the public
interest, an adequate supply of pure and wholesome milk—
incidental or auxiliary provisions must be adopted whereby
the highest possible utilization may be had for the surplus.
If this classified price scheme is to be properly effective, it
is necessary to include some provisions for distributing
among the producers the advantages of the fluid milk
market and the burden of the surplus. In Nebbia v. New
York, 291 U. S. 502, 517-518, the Court described this basis
for necessitous action as follows:
“A satisfactory stabilization of prices for fluid milk
requires that the burden of surplus milk be shared
equally by all producers and all distributors in the
milkshed. ’ ’
The fixing of minimum prices to be paid by handlers for
milk, classified according to its use, is designed as the
primary method of regulation under the Act. Certain
market-wide responsibilities are, however, performed by
co-operative associations of producers, in the Boston and
Xew York milksheds, in order to effectuate the classifica¬
tion, pricing, and pooling provisions in the Order; an outlet
must be available, in as high use classification as possible,
for the surplus milk in order to enable each producer to
realize the proper benefit of the prices fixed by the order.
The compelling fact is that the producers, in the normal
production area, whose milk is required for the fluid milk
market in the season of short production constitute the
permanent productive force for the market; and when these
producers have surplus milk, it must be utilized in some
outlet if the annual supply is to be maintained. Manufac¬
turing facilities must be available to handle the milk
that cannot be utilized on the fluid milk market. Those
co-operatives who provide the plants and facilities often
must assume considerable expense, and in addition assume
costs measured in the expenditure of personal skill and
18
managerial capacity which are out of the ordinary (Joint
App. 179 and 184). The plants and the manufacturing
facilities required to handle the surplus milk are not or¬
dinarily required, or at least not fully required, at other
times of the year. The plants must be maintained as
stand-by facilities, and as such they represent outlays of
capital, by those who undertake to provide such facilities,
in excess of the capital costs of other operators of the same
size, measured by the volume of their fluid milk business,
who assume no part of the burden of surplus disposal (Joint
App. 213-214). In addition, operating costs under such
conditions are often greater than normal. Those co-oper¬
atives who provide these surplus processing facilities,
having converted the surplus into various manufactured
dairy products, must seek wholesale or retail markets for
the products, often through business channels and in dis¬
tant localities with which they, in their ordinary capacity
as fluid milk processors or distributors in a local market,
are not familiar. To the extent that these manufactured
dairy products in the Boston market are the by-products of
seasonal aberrations in the supply, they are produced, and
must be put on the market, in odd lots; and those selling
such products are at the competitive disadvantage of having
no established brand names and of being unable to contract
with wholesalers or jobbers to deliver continuous supplies.
As the result lower prices must be accepted.
The co-operative associations of producers that operate
milk plants have provided facilities which have made pos¬
sible the maintenance of supplies for the market under con¬
ditions of seasonally fluctuating production. In 1939 the
co-operatives having milk plants handled 46 percent of all
the milk regulated by the Boston milk order, but the co¬
operatives had 57.2 percent of the surplus milk (Joint App.
228 and 230a). The co-operative associations handle a
proportionately larger share of surplus than proprietary
handlers, and in doing so the co-operative associations make
a major contribution to the solution of the problem of
handling the surplus.
The physical receipt of surplus milk at a plant of a regu-
19
lated handler who will, under the marketing order, pay the
blended price for such milk is, of course, an element in
milk marketing. But particularly in the Boston market,
the use in which milk is finally disposed of by handlers,
after receipt from producers, is also of great importance
to certain types of handlers and to producers as a whole,
whose blended price directly reflects the use of milk. In the
Boston market, milk handlers are specialized as to the
range of handling operations they perform. Some pro¬
prietary handlers are strictly distributors of bottled fluid
milk—buying all their requirements from plants of co¬
operative associations, and processing no surplus milk.
Others in varying degree, in relation to their fluid sales
requirements, buy direct from producers but not up to the
point where they would have any surplus in their plants.
A few proprietary handlers, in addition to distributing
fluid milk, engage in processing part of the market’s
surplus.
There are two significant aspects of the specialization of
the proprietary handlers who depend upon co-operatives
for all or part of their fluid milk requirements. These pro¬
prietary handlers have in effect transferred all or sub¬
stantially all of the necessary surplus handling operations
to the co-operatives. A plant manufacturing milk products
of the types in which the surplus is disposed, in the Boston
market, must handle a relatively large volume of milk if
the various products are to be processed at low unit costs
and the plant is to operate efficiently. The smaller pro¬
prietary handlers have recognized the consequences of that
fact for their businesses. Because of the small sizes of
their respective fluid milk operations, the relatively small
volumes of surplus milk which they would have to manu¬
facture if they secured all supplies of milk from producers
and handled the total production of their suppliers, includ¬
ing the heavy spring production of such producers, would
result in relatively inefficient manufacturing operations.
Therefore, these handlers have avoided or reduced ineffi¬
ciencies in their own operations by minimizing their direct
receipts from producers, and they rely upon purchases from
20
the co-operatives to make up the balance of their require¬
ments in the months of low production.
The co-operatives in undertaking to supply proprietary
handlers with fluid milk, on demand, channel milk from the
initial receipt from producers to the ultimate use, in the
highest value class, in the form which makes it available to
consumers as fluid milk. The co-operatives 1 function in
this respect tends to maximize blended prices to producers,
because fluid distributors are able to obtain milk on short
notice to meet maximum Class I demands and to meet the
demand of consumers for an adequate supply of fluid milk,
thereby making it possible for the smaller proprietary han¬
dlers to do business in the market primarily as fluid milk
distributors. The co-operative associations serve as fluid
milk suppliers for many of these proprietary handlers.
The sales of Class I milk in 1939 by co-operatives to pro¬
prietary handlers ranged from 6,039,000 pounds to 55 han¬
dlers in June to 12,853,000 pounds to 104 handlers in No¬
vember (Joint App. 230a). The volume of milk sold by
co-operatives as Class I milk in June to proprietary han¬
dlers was approximately 13 percent of the total utilization
of Class I milk in the market for the month, and in Novem¬
ber the co-operatives sales of Class I milk approximated
28 percent of the total utilization of Class I milk for that
month. 17
Price fixing under Federal orders is not static; it is a
continuing process. The design of a successful plan of regu¬
lation to be incorporated in a milk marketing order and
17 These percentages are derived by dividing the figures for total
sales of Class I milk sold by co-operatives to proprietary handlers
in June and November, shown in Government Exhibit No. 6,
Joint App. p. 230a, by the figures for total Class I utilization in
the market for the respective months, reflected in Government
Exhibit No. 2, Table 30, Joint App. p. 228. The figures for total
Class I utilization in the market for June and November are shown
in Exhibit No. 2, Table 30, as average daily Class I utilization as
reported by handlers representing 95 percent of all regulated milk
in the market. To obtain figures for total Class I utilization for
these months for 100 percent of the market, the daily average figures
are divided by .95 and multiplied by the number of days in the
respective months.
21
tlie process of effective administration and amendment of
its regulatory provisions require constant attention to an
extensive and complicated set of conditions. There should
be some mechanism or method for discovering, organizing,
and analyzing the facts relative to current marketing con¬
ditions, for determining their significance, and for propos¬
ing either the initiation of market regulation by means of
an order or necessary changes in an existing order. Co¬
operative associations, including those whose activities con¬
sist mainly of bargaining for milk sales, i. e., bargaining
co-operatives, as well as the associations which operate milk
plants, i. e., operating co-operatives, have given such con¬
tinuous attention to all types of marketing conditions falling
within the scope of the Boston marketing order that this
phase of their activity has, in practical fact, been of much
significance in the effectuation of the regulatory process
(Joint App. pp. 218-219). Some co-operatives in the market
employ trained economists to ascertain and represent pro¬
ducers’ interests. Their analytical work has furnished the
impetus in many instances to the calling of public hearings
to consider amendments to the order. Their expert testi¬
mony in the public hearings enables the establishment of a
factual basis for adjusting prices and other regulatory pro¬
visions of the order to changing market conditions. It is
not to be expected that individual producers, with their
limited means, would be able to represent themselves or to
present competent evidence as to what action should be
taken under regulation in the best interest of all producers.
These co-operatives that receive payments for market-wide
services are constantly engaged in formulating data and in
otherwise preparing for public hearings that are held from
time to time on proposed amendments to the Boston and
New York milk orders.
It is impossible for an individual dairy farmer—prac¬
tically all of whose time must be devoted to production—
to study market conditions so as to market his milk in a
scientific manner. It is impossible for the average dairy
farmer of small means to obtain the advantages obtainable
22
by large organizations. It is impossible for an individual
dairy farmer to build a manufacturing plant or to provide
adequate outlets for the surplus milk in the market so as to
achieve maximum returns to producers. It is impossible
for an individual dairy farmer to increase market demand
by substantial advertising. But above all, it is impossible
for an individual dairy farmer to effectuate an equitable
sharing of the burden of surplus milk—so essential if the
classification, pooling, and pricing provisions of the Boston
order are to effectuate the declared purpose of the Act. To
do these things, which the individual dairy farmer cannot
do, requires a Federal order in the Boston market providing
for the payment of a uniform blended price to producers,
on the basis of market-wide utilization of milk, and the per¬
formance of these market-wide services by the co-operatives.
The co-operatives “are able to keep in touch with the
supply situation and divert milk to its most economical uses
better than any other market agency.” Cooperative Market¬
ing of Dairy Products (Farm Credit Administration, by
Harry C. Trelogan and French M. Hyre, June 1939) p. 8.
In addition to positive action to inform and shape the course
of regulation in the market, the co-operative associations
constantly carry on informational activities which have the
effects of interpreting the regulation to producers and of
educating producers with regard to market conditions.
Educational meetings are held at which non-members, as
well as members, may attend. Radio programs 18 are regu¬
larly maintained by some of the co-operatives and in this
manner non-members, as well as members, are kept in¬
formed as to current market conditions. Some co-opera¬
tives publish and issue to their members periodicals which,
while circulation is mainly among members of these co¬
operatives. frequently contain articles urging and assisting
18 E.g., New England Dairyman (September 1941), Vol. 25,
No. 9, p. 6; New England Dairyman (August 1945), Vol. 29,
No. 8, pp. 1 and 3, and (September 1945), Vol. 29, No. 9, pp. 1
and 16; New England Dairyman (November 1945), Vol. 29, No. 11,
p. 2.
23
producers to market milk so that their collective efforts will
benefit all interests in the market. 10
There is another significant respect in which the pay¬
ments to the co-operatives, for market-wide services, relate
in a proximate manner to the class prices established by the
order. In fixing the class prices authorized by §8c(5) of
the Act, consideration must be given to the possibilities for
disposition of surplus milk. The class prices are determined
at least to some extent by the prospective returns from sur¬
plus milk. If the surplus milk is to be dumped for lack of
any outlet, the prices under the order may be substantially
different from the prices in the event of an outlet for the
surplus milk. To hold that the provisions in the order en¬
couraging the disposition of surplus milk to the best ad¬
vantage of all producers, in the market, are not auxiliary
to the fixing of class prices is to fail to recognize compelling
and irrefutable facts.
In determining the Class II price, which applies to surplus
milk, the costs of handling such milk and the net returns to
handlers from its sale must be considered, if adequate
market outlets for surplus are to be maintained under the
order. On August 1,1941, the date on which the co-operative
payment provisions were adopted in the order, a number
of other amendments were also made effective, including
a change in that element of the Class II price which gives
consideration to the costs of handling Class II, or surplus,
milk. The change in the Class II price provision was made in
specific contemplation of one of the effects which was antici¬
pated to flow from the co-operative payment provisions
(Joint App. 89). The price change and the effect of the co-
19 E.G., each issue of the New England Dairyman, The Dairy-
News, The Maine Milk Producer, and Our Milk contains a special
article analyzing the blended price, under the Boston milk order,
for the preceding month. These publications regularly contain
articles dealing with the production and utilization of milk in the
Boston milkshed, the factors determining the blended price, outlets
for surplus milk, current economic conditions, and from time to
time proposed amendments to the Boston milk order.
24
operative payment provisions were designed to provide
properly for an outlet for all surplus milk at a proper price.
The co-operative payment provisions were directly related
to the class price provisions. In effect, the co-operative
payment provisions, in this respect, constitute a part of
the pricing of milk.
Careful supervision is required by the order with regard
to these payments to co-operatives. The payments are not
made to all co-operatives, but only to those who perform
the market-wide services. Each co-operative that receives
these payments is required to submit to the Market Ad¬
ministrator reports, from time to time, with respect to its
“performance in meeting the requirements set forth as the
basis for such payments.” 7 CFR, 904.10(c) and
927.9(f). The Market Administrator maintains close super¬
vision over the co-operatives with regard to these payments,
and whenever “there is reason to believe” that a co¬
operative is no longer performing the market-wide services,
the payments are suspended and held in reserve by the
Market Administrator until the Secretary has, after notice
and opportunity for a hearing, ruled as to the performance
of the co-operative. 7 CFR, 904.10(d) and 927.9(f).
All co-operatives who receive payments do not receive
payments at the same rate. Under the New York order, for
example, a payment is made to bargaining co-operatives—
the rate depending on the services performed; and a higher
payment is made to operating co-operatives “who have
sufficient plant capacity to receive all the milk of producers
who are members and to be willing and able to receive milk
from producers not members.” 7 CFR, 927.9(f). Any
co-operative who receives any payment must, under the
order, arrange for and supply “in times of short supply,
('lass I milk to the marketing area,” and secure “utilization
of milk, in times of long supply, in a manner to assure the
greatest possible returns to all producers.” 7 CFR,
927.9(f). Other requirements also must be met before a
co-operative is entitled to receive these payments for
25
market-wide services. Under the Boston order, as well as
under the New York order, a co-operative can receive no
payment unless its application has been submitted to the
Secretary, and the Secretary has made a determination that
the respective co-operative is performing the market-wide
services and is, therefore, entitled to the payments. 7 CFR,
904.10(a) and 927.9(f).
The rates of payment to co-operatives under the Boston
order were modified by amendments effective August 1,
1947 (12 F. R. 4921; 7 CFR, 1947 Supp., 927.9). The hear¬
ing record on which those amendments were issued is not
a part of the record in this case. The co-operative pay¬
ment provisions were originally included in the Boston or¬
der on August 1, 1941, and the hearing record on which
those amendments w'ere based is included in the record in
this case. But the order provisions now in effect are based
on a hearing record which the appellee did not introduce
in the record in this case. 20
B. Tho Provisions for Payments to Co-operatives for
Market-Wide Services are not Inconsistent with Section
Sc(5) of the Act.
The lower court was of the opinion (Joint App. 146) that
the payments to the co-operatives, for market-wide serv¬
ices, are an “adjustment” that is inconsistent with the re¬
quirement in §8c(5) of the Act that, under a market-wide
pool, the payments to all producers and associations of
producers delivering milk to all handlers shall be at a uni¬
form price for all milk so delivered subject only to the
adjustments specified in §8c(5) of the Act. The lower
court’s opinion states (Joint App. 146) that $8c(5) of the
Act enumerates “the exact types of provisions that may be
contained in a marketing order,” and specifies the “adjust¬
ments that the Secretary may make in computing the price
20 The scope of judicial review under these circumstances is dis¬
cussed, infra , pp. 36-40.
26
to be paid to producers,” and that under the terms of
§ 8c(5) of the Act a milk order may contain “no others.”
The lower court failed to take into consideration another
provision in the Act. The limitations in § 8c(5) to the terms
and conditions enumerated therein “and no others” is
qualified by the prior statement that “except as provided in
subsection (7) [of § 8c of the Act],” a milk order is limited
to one or more of the terms and conditions set forth in
§Sc(5). The provision for payments to co-operatives, for
market-wide services, is based on § 8c(7) (D) of the Act, and
therefore by the specific language of § 8c(5) an adjustment
or provision under the “incidental . . . and necessary”
authorization is not required to be found in § Sc(5), and if it
is an adjustment at all it may be in addition to those in
$ Sc(5).
Assuming, arguendo, that the statutory exception for
provisions under § Sc(7)(D) is not applicable so as to per¬
mit an adjustment in addition to those adjustments specified
in § Sc(5) of the Act, it is clear that these payments to co¬
operatives for market-wide services are not inconsistent
with §8c(3). They are not adjustments to the “uni¬
form prices” required by the Act to be paid to producers.
Cf. Green Valley Creamery v. United States (C. A. 1),
10S F. 2d 342, 345. Section 8c(5)(A) of the Act
requires that prices to handlers shall be “uniform as to all
handlers” subject to certain enumerated adjustments.
There is no question that the Boston order provides for
prices uniform as to all handlers. Section 8c(5)(B) of the
Act merely provides that prices paid by the same handler
under subparagraph (i) or by handlers under sub-para¬
graph (ii) shall be uniform to all producers and associations
of producers for “all milk delivered by them.” There is
no requirement in the statute that the uniform prices to
producers must reflect the total utilization of milk received
by handlers and priced under the order. There is no re¬
quirement in the statute that the total sums paid by each
handler equal the total sums paid to producers or associa¬
tions of producers under the order. There is no require¬
ment in the statute that the total amount paid to producers
27
or associations of producers must equal the value of the
milk purchased by handlers at the prices specified in the
order. The payments to the co-operative associations, for
market-wide services, are deducted before the computation
of the blended price, and the making of the co-operative
payments does not alter or interfere with the requirement
in the Act for “uniform prices” for all milk delivered by
producers.
Assuming, arguendo, that the payments to co-operatives
for market-wide services are adjustments to the “uniform
price” and can be justified only if expressly authorized by
§ 8c(5) of the Act, the provisions in question are within the
authorization in § 8c(5) (B) to make “a further adjustment,
equitably to apportion the total value of milk purchased by
any handler, or by all handlers, among producers and asso¬
ciations of producers, on the basis of their marketings of
milk during a representative period of time.” The market¬
wide services by co-operatives are necessary “equitably to
apportion” the total value of milk among all producers.
The proprietary handler is not expected to perform these
market-wide services, since from the nature of its business
a proprietary handler is interested only in the spread be¬
tween the purchase price and the sale price of milk. A co¬
operative association performing market-wide services is,
however, interested in securing the highest possible return
for producers. A co-operative association must account
to the pool at the class prices, and the co-operative pay¬
ments compensate, at least in part, the association for the
losses incurred in performing the market-wide services; and
such payments are necessary in order ‘ ‘ equitably to appor¬
tion” the total value of milk among all producers.
C. The Statute’s Terms, Purposes, Background , and His¬
tory Indicate that Section 8c(7)(D) of the Act is to be Given
Its Plain Meaning and to Include Payments to Co-operative
Associations for Market-Wide Services Whenever There is
Warrant in the Hearing Record.
If one goes beyond the plain meaning that the “inci¬
dental . . . and necessary” authorization in § 8c(7) (D)
26
to be paid to producers,” and that under the terms of
§ Sc(5) of the Act a milk order may contain “no others.”
The lower court failed to take into consideration another
provision in the Act. The limitations in § 8c(5) to the terms
and conditions enumerated therein “and no others” is
qualified by the prior statement that “except as provided in
subsection (7) [of § 8c of the Act],” a milk order is limited
to one or more of the terms and conditions set forth in
§ Sc(5). The provision for payments to co-operatives, for
market-wide services, is based on § 8c(7) (D) of the Act, and
therefore by the specific language of § 8c(5) an adjustment
or provision under the “incidental . . . and necessary”
authorization is not required to be found in § Sc(5), and if it
is an adjustment at all it may be in addition to those in
§ 8c(5).
Assuming, arguendo, that the statutory exception for
provisions under § 8c(7)(D) is not applicable so as to per¬
mit an adjustment in addition to those adjustments specified
in § Sc(5) of the Act, it is clear that these payments to co¬
operatives for market-wide services are not inconsistent
with. $ 8c(5). They are not adjustments to the “uni¬
form prices” required by the Act to be paid to producers.
Cf. Green Valley Creamery v. United States (C. A. 1),
10S F. 2d 342, 345. Section 8c(5)(A) of the Act
requires that prices to handlers shall be “uniform as to all
handlers” subject to certain enumerated adjustments.
There is no question that the Boston order provides for
prices uniform as to all handlers. Section 8c(5)(B) of the
Act merely provides that prices paid by the same handler
under subparagraph (i) or by handlers under sub-para¬
graph (ii) shall be uniform to all producers and associations
of producers for “all milk delivered by them.” There is
no requirement in the statute that the uniform prices to
producers must reflect the total utilization of milk received
by handlers and priced under the order. There is no re¬
quirement in the statute that the total sums paid by each
handler equal the total sums paid to producers or associa¬
tions of producers under the order. There is no require¬
ment in the statute that the total amount paid to producers
27
or associations of producers must equal the value of the
milk purchased by handlers at the prices specified in the
order. The payments to the co-operative associations, for
market-wide services, are deducted before the computation
of the blended price, and the making of the co-operative
payments does not alter or interfere with the requirement
in the Act for “uniform prices” for all milk delivered by
producers.
Assuming, arguendo, that the payments to co-operatives
for market-wide services are adjustments to the “uniform
price” and can be justified only if expressly authorized by
§ 8c(5) of the Act, the provisions in question are within the
authorization in § 8c(5) (B) to make “a further adjustment,
equitably to apportion the total value of milk purchased by
any handler, or by all handlers, among producers and asso¬
ciations of producers, on the basis of their marketings of
milk during a representative period of time.” The market-
wide services by co-operatives are necessary “equitably to
apportion” the total value of milk among all producers.
The proprietary handler is not expected to perform these
market-wide services, since from the nature of its business
a proprietary handler is interested only in the spread be¬
tween the purchase price and the sale price of milk. A co¬
operative association performing market-wide services is,
however, interested in securing the highest possible return
for producers. A co-operative association must account
to the pool at the class prices, and the co-operative pay¬
ments compensate, at least in part, the association for the
losses incurred in performing the market-wide services; and
such payments are necessary in order “equitably to appor¬
tion” the total value of milk among all producers.
C. The Statute 7 s Terms , Purposes , Background , and His¬
tory Indicate that Section 8c(7) (D) of the Act is to be Given
Its Plain Meaning and to Include Payments to Co-operative
Associations for Market-Wide Services Whenever There is
Warrant in the Hearing Record.
If one goes beyond the plain meaning that the “inci¬
dental . . . and necessary” authorization in § 8c(7) (D)
28
spontaneously yields, all other relevant considerations con¬
firm what the text of the Act expressly authorizes.
Regard for the purposes of a remedial statute “should
infuse construction of the legislation if it is to be treated
as a working instrument of Government and not merely as a
collection of English words.” United States v. Dotter -
wcich, 320 U. S. 277, 280. The very words “incidental . . .
and necessary,” with the purposes of the statute in mind,
import breadth of coverage, and admonish against a con¬
stringent construction which would result in the legislation
affording only a partial solution to the economic evils
dealt with by the Act.
The Act expressly prohibits the inclusion of certain pro¬
visions in milk orders, and those are the only exceptions
or provisions which, as a matter of law, cannot be included
under the “incidental and necessary” authorization in
§ Sc (7)(D) of the Act even if the hearing record should
contain evidence of their desirability. It is provided that
“no order applicable to milk and its products in any mar¬
keting area shall prohibit or in any manner limit, in the case
of the products of milk, the marketing in that area of any
milk or product thereof produced in any production area
in the United States.” Section 8c(5)(G) of the Act, 7
U.S.C. 60Sc(5)(G). Even if it should seem to be incident¬
ally necessary, in the light of the evidence in a hearing
record, to prohibit the marketing of milk from a particular
area or region, the statute expressly prohibits any such
prohibition. Bailey Farm Dairy Co. v. Anderson (C.A. 8),
157 F. 2d 87, cert, denied 329 U. S. 788; and Hood & Sons
v. DuMond, 336 U. S. 525, 543-544.
In addition, §8c(7) (D) provides that under the “inci¬
dental . . . and necessary” provision, no provision may
be included which is “inconsistent with” the classification,
pooling, and pricing provisions of § 8c(5) of the Act. An¬
other exception is in § 8c (13) (B) in which the statute states
that no order shall be applicable to any producer “in his
capacity as a producer.”
The Act has, therefore, enumerated the provisos or limi¬
tations, and with those exceptions the “incidental . . .
29
and necessary” authorization is to have such coverage as
the plain words may be said to include on the basis of the
evidence in a hearing record. The exceptions in § 8c(5) (G)
and § 8c(13)(B) from the operation of the classification,
pooling, pricing, and “incidental . . . and necessary”
authorizations in the statute preclude the enlargement of
the exceptions by an addition, as contended for by the
appellees. George Moore Ice Cream Co. v. Rose, 289 U. S.
373. The textual meaning of the “incidental . . . and
necessary” authorization is thus reinforced by the impli¬
cation that the exception in § 8c(5)(G), and the phrase in
§ 8c(7)(D) prohibiting a provision “inconsistent with”
the classification, pooling, and pricing provisions of § 8c(5),
and the prohibition in § 8c(13)(B) are the only exceptions
as to what may be included, in view of the evidence, as
incidental and necessary to effectuate the other provisions
of the order. Exceptions made in such detail preclude
their enlargement by implication. The proscriptions in
the Act give emphasis to the view that, aside from those
limitations, the Congressional purpose was to permit the
plain language of § 8c(7) (D) to be applied to any situation
which, under the evidence, is incidental and necessary to
the effectuation of the classification, pooling, and pricing
provisions in the order. 21
There are additional tokens of intention within the statute
and outside of it. The Secretary is required by the Act to
“accord such recognition and encouragement to producer-
owned and producer-controlled co-operative associations as
21 Section 8c (5) of the Act expressly recognizes that additional
provisions, such as “incidental . . . and necessary,” may be in¬
cluded under § 8c (7). That §8c(5) does not enumerate all the
terms and conditions that may be included in a milk order is also
plainly evident by reference to § 10(b) (2) which requires that
each order “relating to milk and its products . . . shall provide
that each handler subject thereto shall pay to any authority or
agency fi.e., the Market Administrator] established under such
order such handler’s share (as approved by the Secretary) of
such expenses as the Secretary may find will necessarily be incurred
by such authority or agency, during any period specified by him,
for the maintenance and functioning of such authority or agency.”
7 U.S.C. 610(b) (2).
30
will be in harmony with the policy toward co-operative asso¬
ciations set forth in existing acts of Congress, and as will
tend to promote efficient methods of marketing and distri¬
bution.” Section 10(b)(1) of the Act, 7 U.S.C. 610(b)(1).
It was made clear in United States v. Rock Royal Co-oper¬
ative, Inc., 307 U. S. 533, 562-565, that different treatment
and special considerations have been accorded to marketing
cooperatives by state and congressional legislation alike,
and that the “distinctions between such co-operatives and
business organizations have repeatedly been held to justify
different treatment.” Numerous acts of Congress deal
with co-operatives differently from proprietary business
enterprises, and enunciate the policy of aiding and encour¬
aging the establishment, operation, and growth of market-
mg co-operatives.—
The Agricultural Marketing Act of June 15, 1929, 46
Stat. 18, 12 U.S.C. 1141, 1141 (j), expresses the policy of
Congress to promote merchandising of agricultural com¬
modities in such a way as to put agriculture on a basis of
economic equality with other industries, and this is to be
accomplished by “encouraging the organization of produc¬
ers into effective associations of producers under their own
control for greater unity of effort in marketing and by pro¬
moting the establishment and financing of a farm-market¬
ing system of producer-owned and producer-controlled co¬
operative associations and other agencies.” Some of the
other instances of the Congressional policy of special con¬
sideration for, and treatment of, cooperatives are in the
Clayton Act, 38 Stat. 730,15 U.S.C. 17; the Capper-Volstead
Act, 42 Stat. 388, 7 U.S.C. 291; the Robin son-Patman Act
of June 19, 1936, c. 592, s. 4, 49 Stat. 1528, 15 U.S.C. 13b;
22 It was recognized at the time of the enactment of this legisla¬
tion for milk regulation that there is to be a continuing need,
Tinder these programs, for co-operative action in searching for
"additional outlets, the stimulation of demand, and the improve¬
ment of handling techniques at points where private trader enter¬
prise failed fully to serve the farmer’s interest.” Dr. E. G. Nourse
(then Director of the Institute of Economics, Brookings Institution),
American Cooperation, 1934, a collection of papers and discussions
comprising the tenth summer session of The American Institute of
Cooperation, p. 68.
31
and the Grain Futures Act, 42 Stat. 998, as amended and re¬
designated as the Commodity Exchange Act, 49 Stat. 1491,
7 U.S.C. 10a.
Although the special considerations extended by Con¬
gressional legislation to co-operatives may have resulted
in some instances in competitive advantages to such asso¬
ciations, the difference between such associations and ordi¬
nary business organizations constitutes a reasonable and
legal basis of classification. Flint v. Stone Tracy Co., 220
U. S. 107, 173; Brushaber v. Union Pacific Railroad, Co.
240 U. S. 1, 21; Chicago Board of Trade v. Olsen, 262 U. S.
1; and In re Marketing Association of Fort Wayne, Inc.,
8 F. 2d 626. State legislation along the same pattern has
been sustained. American Sugar Refining Co. v. Louisiana,
179 TJ. S. 89; Liberty Warehouse Co. v. Burley Tobacco
Growers Co-operative Marketing Association, 276 U. S. 71;
and many other cases cited in United States v. Rock Royal
Co-operative, Inc., 307 U. S. 533, 563, fn. 27.
The fundamental basis 23 for special treatment of co¬
operatives by the legislature was explained by Judge (later
Justice) Cardozo in People v. Teuscher, 248 N. Y. 454,
463, as follows:
“More and more, in its social engineering, the law is
looking to co-operative effort by those within an indus¬
try as a force for social good. It is harnessing the
power that is latent within groups as it is harnessing
the power in wind and fall and stream. Conspicuously
it is doing this in its dealings with agricultural pro¬
ducers, spread often over wide areas, and thus deficient
in cohesion, but yielding up new energies when func¬
tioning together. We see this in the very statutes,
23 An essential difference between a co-operative and a capital-
stock corporation is that the latter is founded on the earning
capacity of the capital invested—and that investment is the basis
of administration, control, and distribution of earnings—but a
co-operative, on the other hand, is founded for the mutual benefit
of its members, and its earnings or profits are returned not on
the basis of the capital which each member has contributed, but
on the volume of his shipments and, therefore, on the basis of his
use of the co-operative association. Nourse, The Legal Status of
Agricultural Cooperation (The Institute of Economics, 1927), p. 89.
32
already quoted, with their attempt to check tuberculosis
[in cattle] by co-operative effort [on the part of dairy
farmers]. We see it in the co-operative marketing
associations which have made such headway of recent
years in this State and many others, associations with
privileges and powers peculiar to themselves.”
These declarations of Congressional policy with respect
to co-operatives foreclose any argument that the “incidental
. . . and necessary” authorization is to be given a cramp¬
ing construction so as to preclude, as a matter of law, its
l>eing applicable to market-wide services performed by co¬
operatives. No basis appears for cutting down the scope
of the natural meaning of the plain provision in the Act.
In the absence of a basis to the contrary, it must be assumed
that Congress evidently meant what these words ordinarily
convey. Jones v. Liberty Glass Co., 332 U. S. 524, 531. The
Congressional declarations are such that assuming, argu¬
endo, any question as to the scope of the legislative
authorization, that question is to be resolved by an inter¬
pretation favorable to the view that Congress intended,
whenever there is a warrant in the hearing record, for the
“incidental . . . and necessary” provision to be appli¬
cable to co-operatives who perform market-wide services.
These plain words of the Act are to be interpreted “in their
ordinary, every-day sense” ( Crane v. Commissioner, 331
C. S. 1, 6), and so as “to carry out in particular cases the
generally expressed legislative policy.” Securities and
Exchange Commission v. C. M. Joiner Leasing Corp., 320
F. S. 344, 351.
These Congressional declarations of policy as to co¬
operatives are consonant with Congressional action relative
to this exact issue. The services for which deductions are
allowed are described in the legislative history of a bill
containing a clarifying amendment on this point. S. 3426,
76th Cong., 3d Sess. This amendment was described in the
Senate Committee Report (No. 1719, 76th Cong., 3d Sess.,
p. 8) as covering services “which are identifiable as bene¬
fiting all producers with a reasonable degree of equality
33
ns distinguished from services, the benefits of which are
limited primarily to members of a particular cooperative
association.” See to the same effect, Hearings, Subcom¬
mittee of Senate Committee on Agriculture and Forestry
on S. 3426, 76th Cong., 3d Sess., pp. 52-53, 75. The services
are described in 86 Cong. Rec. 12258-12259. The Senate
report and the explanation to Congress {ibid.) shows that
the object of the amendment proposed was to “establish
more explicit standards,” thus avoiding the question of
delegation of power, to guide the Secretary in making pay¬
ments which he was already authorized to make under his
general power to prescribe minimum prices and the manner
of paying produers. S. 3426, which contained a large num¬
ber of other amendments, passed the Senate (86 Cong.
Rec. 12266) but died in the House committee; although
other amendments had been vigorously opposed before the
Senate Committee, this particular amendment had met with
no objection (86 Cong. Rec. 12256). The action by the
Senate indicates a legislative policy favorable to the inter¬
pretation by the Secretary as to the scope of the “incidental
. . . and necessary” authorization in the Act. Sioux
Tribe of Indians v. United States, 316 U. S. 317, 329; and
Porter v. Murray (C.A. 1), 156 F. 2d 781, 785. The House, in
failing to take any action on the bill, is not to be regarded as
having disapproved co-operative payments in milk orders.
Gemsco, Inc. v. Walling, 324 U. S. 244, 260-265.
Additional reasons prevail in support of the view that the
“incidental . . . and necessary” provisions in the Act
should not be cut down by interpretation so as to be of
negligible use, or no use, in dealing with the variant and
complex situations in the fluid milk industry.
The necessity of permitting the words of the Act to have
their full meaning is revealed by the numerous instances in
which, on the basis of the evidence at a public hearing, the
Secretarv has had to include “incidental . . . and neces-
sary” provisions in order to effectuate the classification,
pooling, and pricing provisions in a milk order. The giving
of a limited circumscription, as a matter of law, to the defini-
34
tive authority conferred on the Secretary would, in many
instances, strangle the effectiveness of the programs."' 4
The lower court’s opinion (Joint App. 142-150) gives an
unwarranted rigidity to the application of the word “neces¬
sary.” It is clear that, in a remedial statute, the word
“necessary” does not mean “indispensable” or “essen-
tial” or “vital.” Armour & Co. v. Wamtock, 323 U. S. 126,
129-132; and Borden Co. v. Borella, 325 U. S. 679, 682-684.
The authorization in the Act to include incidental and neces¬
sary provisions in order to effectuate the measures enu¬
merated in the Act must include such provisions as are
reasonably suitable for carrying into execution the powers
expressly granted. Gemsco, Inc. v. Walling , 324 IT. S. 244.
- 4 E. g., the St. Louis milk order provides (7 CFR, 903.3(a)!
that, in establishing the classification of milk received by a handler
from producers, “the burden rests upon such handler to account
for such milk and to prove to the Market Administrator that such
milk should not be classified as Class I milk.” This type of pro¬
vision was held valid in United States v. Ridgeland Creamery Co.
(D.C. W.D. Wise.), 47 F. Supp. 145, 149; and Bailey Farm Dairy
Co. v. Jones (D.C. E.D. Mo.), 61 F. Supp. 209, 225, affirmed
Bailey Farm Dairy Co. v. Anderson (C.A. 8), 157 F. 2d 87. A
similar provision is included in 27 other milk orders. Another
provision based on the “incidental . . . and necessary” authoriza¬
tion in the statute is in the Louisville milk order (7 CFR, 946.7
(b)(3) and 946.8(d)(2)) whereby certain sums arc deducted in
April. May, and June of each year and then paid to producers in
September, October, and November in order to offer an incentive
to minimize seasonality of production. See, The Louisville Fall-
Premium Plan for Seasonal Milk Pricing (Kentucky Agricultural
Experiment Station, University of Kentucky) Bulletin 510. A
similar provision is in four orders. A provision for the “termina¬
tion of obligations” has been included in twenty-seven orders (14
F.R. 791-794). Provisions relative to monthly reports by handlers,
records to be kept, and authorization for audit review are set forth
in all orders whereby the various obligations of handlers may be
computed and verified. The New York order contains (7 CFR,
927.9 (h)) provisions for compensatory payments with respect to
non-pooled milk. A similar provision is included in eleven other
orders. Provisions for the accounting of inter-handler sales arc
included in thirty orders; requirements with respect to interest
are set forth in five orders; provisions for the designation of pool
plants and the cancellation of pool plants are in a number of orders,
as well as a percental requirement for Class I milk; and thirteen
orders contain requirements with respect to the accounting for milk
received from undisclosed sources.
35
The “incidental . . . and necessary” provision is to
be viewed as a part of the whole texture of the Act and of
the economy to which the Act applies. 2 ' Broad standards
for administrative action “is a reflection of the necessities
of modern legislation dealing with complex economic and
social problems.” Sunshine Anthracite Coal Co. v. Adkins,
310 U. S. 381, 398. It is apparent ( American Power &
Light Co. v. Securities and Exchange Commission, 329 U. S.
90, 105) that
“The legislative process would frequently bog down
if Congress were . . . required to appraise before¬
hand the myriad situations to which it wishes a par¬
ticular policy to be applied and to formulate specific
rules for each situation. Necessity therefore fixes a
point beyond which it is unreasonable and impracti¬
cable to compel Congress to prescribe detailed rules.
In deciding whether certain administrative action was
“necessary to ensure” the effectuation of § 11(b)(2) of the
Public Utility Holding Company Act of 1935 (49 Stat. 803,
821; 15 U. S. C. 79k(b)(2)), it was held that Congress had
entrusted to the administrative agency “the responsibility
of selecting the means of achieving the statutory policy”
and the relation of ‘ ‘ remedy to policy is peculiarly a matter
for administrative competence,” and its “judgment is en¬
titled to the greatest weight.” American Power & Light
Co. v. Securities and Exchange Commission, 329 U. S. 90,
112. Assuming, arguendo, that the plain language of the
25 The mutable circumstances to be dealt with in the classifica¬
tion, pooling, and pricing of milk are such that the statutory
authorization in England for milk regulation sets forth an “incidental
. . . and necessary” provision. Certain provisions may be included
in the regulations in England and, in addition, “such matters as
are incidental to or consequential on the provisions of this Act”
relating to the regulations “or are necessary for giving effect to
those provisions.” Agricultural Marketing Act, 1931, 21 and 22
Geo. 5 c. 42, § 6 (Vol. 1, Halsbury’s Statutes of England, 2d ed.,
p. 243). The regulation of milk marketing in England is discussed
in the Milk Report of Reorganization Commission for Great Britain
(Ministry of Agriculture and Fisheries, Economic Series No. 44),
pp. 6-117.
36
Act is susceptible of either of two opposed interpretations,
it is to be read in the manner which effectuates rather than
frustrates the major purpose. Shapiro v. United States,
333 U. S. 1, 31.
The statute’s terms, background, purposes, and history
give convincing evidence of the Congressional intention for
the “incidental . . . and necessary” provision in the
Act to have the plain, unqualified meaning that those words
ordinarily convey. 26
D. The Scope of Judicial Review Is Limited to the
Inquiry as to Whether Substantial Evidence in the
Hearing Record, on Which the Secretary's Order Is
Based, Supports the Secretary's Action. There Being
No Question That Substantial Evidence Supports the
Secretary's Findings That the Order Provisions for
Payments to Co-operatives Are Incidental and Neces¬
sary Under Section 8c(7)(D) of the Act, and Not In¬
consistent with Section 8c(5), and Inasmuch as the
Appellees Failed to Place the Entire Hearing Record
Before the Court, the Appellees' Attack Upon the Pro¬
visions of the Order Must Fail.
The scope of judicial review under §8c(15) of the Act,
providing the procedure wdiereby a handler may question
the legality of an order or a provision in it, is limited to
the inquiry as to whether substantial evidence supports the
order of the Secretary. Wetmiller Dairy & Farm Products,
Inc. v. Wickard (C. A. 2), 149 F. 2d 330; Wawa Dairy Farms
v. Wickard (C. A. 3), 149 F. 2d 860; New York State Guern¬
sey Breeders' Co-operative Association v. Wickard (C. A.
2), 141 F. 2d 805, cert, denied, 323 U. S. 725; Waddington
Milk Co. v. Wickard (C. A. 2), 140 F. 2d 97; Queensboro
Farm Products Inc. v. Wickard, 47 F. Supp. 206, affirmed
(C. A. 2), 137 F. 2d 969; Bailey Farm Dairy Co. v. Jones,
61 F. Supp. 209, affirmed (C. A. 8), 157 F. 2d 87; Crull v.
Wickard (C. A. 6), 137 F. 2d 406; and Titusville Dairy Prod¬
ucts Co. v. Brannon (C. A. 3), 176 F. 2d 332, 336.
The Act is silent as to the scope of judicial review when—
26 This is subject only to the exceptions enumerated in the Act,
supra, pp. 28-29.
37
as in this action—dairy farmers, who are not handlers,
attack as illegal an order or a provision of an order. It
is settled, however, that the substantial evidence test is
applied by the courts in reviewing administrative action,
based on a hearing record, so long as no other standard is
specifically prescribed by statute. Shields v. Utah Idaho
Central R. Co., 305 U. S. 177. The validity, therefore, of
the provisions in the order is to be tested by whether sub¬
stantial evidence in the hearing record before the Secretary
supports the findings.
The substantial evidence test, with respect to administra¬
tive findings based on a hearing record, has been approved
by this Court as meaning that “the findings of fact must
be sustained if supported by substantial evidence and those
findings cannot be set aside simply because different infer¬
ences may be drawn from the evidence,” and the require¬
ment that there must be substantial evidence “does not
require that there be proof beyond a reasonable doubt, . . .
but only such ‘relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.’ ” Hughes v.
Securities and Exchange Commission, (C. A. D. C.), App.
D. C. ,174 F. 2d 969, 974. Congress gave to the Secretary,
not to the courts, the power to draw inferences from the
facts in the hearing record and to appraise conflicting and
circumstantial evidence. It is not, therefore, for the courts
to weigh conflicting testimony or pass upon the credibility
of witnesses or reject inferences drawn by the Secretary,
from the facts in the hearing record, merely because dif¬
ferent inferences might seem to be more reasonable. Inter¬
state Commerce Commission v. Jersey City, 322 U. S. 503;
National Labor Relations Board v. Southern Bell T. <& T.
Co., 319 U. S. 50; Gray v. Powell, 314 U. S. 402; Interstate
Commerce Commission v. Union Pacific R. Co., 222 U. S.
541; and Victor Mfg. & Gasket Co. v. National Labor Rela¬
tions Board (C. A. 7), 174 F. 2d 867, 868.
This scope of judicial review is consonant with the char¬
acterization of the review procedure provided in the Act
in United Stales v. Ruzicka, 329 U. S. 287, in which it was
stated that the questions presented even when formulated
38
in constitutional terms, arise out of, or are entwined with,
“factors that call for understanding of the milk industry,”
and any review of the Secretary’s action is limited to the
basis of his ruling and of the elucidation w r hich he gave to
his ruling. This is in accord wdth the prevailing principle,
under other statutes providing for administrative action
subject to review by the courts, that in reviewing even the
“ultimate conclusions” of the administrative agency, it
is not the Court’s function to substitute its own infer¬
ences of fact for the agency’s where the latter have support
in the record, and as to questions of law involving the specific
application of a broad statutory term, in a proceeding in
which the agency administering the statute must determine
it initially, the reviewing Court’s function is limited, and
the agency’s determination, if not prohibited by the
statute, is to be accepted if it is supported by substantial
evidence. Cardillo v. Liberty Mutual Insurance Co.,
330 U. S. 469; National Labor Relations Board v.
Hearst Publications, 322 U. S. Ill; Dobson v. Com¬
missioner, 320 U. S. 489; National Labor Relations
Board v. Nevada Copper Corp., 316 U. S. 105; Gray v.
Powell, 314 U. S. 402, 412-13; South Chicago Coal & Dock
Co. v. Bassett, 309 U. S. 251; Parker v. Motor Boat Sales,
Inc.. 314 U. S. 244; Rochester Telephone Corp. v. United
States, 307 U. S. 125; and Swayne & Hoyt v. United States,
300 U. S. 297.
The complaint presents no issue as to whether substantial
evidence supports the Secretary’s findings. The sole issue
is whether, under the terms of the statute, any such pro¬
vision for payments to cooperatives for services to the
market as a whole could, under any circumstances, be in¬
cluded in a milk order. The appellees’ argument assumes
that there is some simple clear test which the courts use in
dealing with what is “incidental . . . and necessary”
wherebv it can be determined, without reference to the
facts, whether particular provisions are or are not inci¬
dental and necessary to the classification, pooling, and
pricing provisions in the milk order. That argument, of
course, would seem to be equally applicable to the statu¬
tory provisions for classification, pooling, and pricing, and
39
those provisions in the Act would likewise be interpreted
without regard to the facts presented. Nothing in the
statute’s background, terms, or purposes indicates its scope
to be limited in any such unusual manner; nothing indicates
that the term “incidental . . . and necessary” is to be
regarded as a term of art having, as a matter of law, a
definite and restricted meaning so that its application is
to be ascertained in vacuo. Any such scope of judicial
review would ignore the canonical rule that a regulatory
statute, dealing with complex or variant situations, must
be read in the light of the mischief to be corrected and the
end to be attained, and action taken on the basis of a hear¬
ing record is to be tested by whether the action has war¬
rant in the evidence. National Labor Relations Board v.
Hearst Publications , 322 U. S. 111.
Substantial evidence supports, supra pp. 12-25, the Sec¬
retary’s finding in the application of the “incidental . . .
and necessary” authorization in the Act in the issuance* 7
of the amended order, effective August 1, 1941. The plain
■words of the statutory provision, in their ordinary accep¬
tation and in that sense in which the Congress has obviously
used the terms, permits the inclusion in a milk order of
any provision 28 which, on the basis of the hearing record,
is incidental to the classification and pricing provisions
and necessary to effectuate those provisions. Any such
application of the statute must, therefore, be decided on
the basis of the evidence in the hearing record, and if sub¬
stantial evidence supports the Secretary’s action, the pro¬
visions of the order are to be sustained on judicial review.
Assuming, arguendo , that the complaint presents an issue
as to whether substantial evidence in the hearing record
supports the provisions in the order, the record shows,
27 The co-operative payment provisions in the order were sub¬
sequently amended. The hearing record on which the subsequent
amendments are based is not before the Court.
28 This is subject to the statutory exceptions discussed, infra,
pp. 28-29. The findings by the Secretary are that these provisions
in the order are not inconsistent with §8c(5) of the Act, and
these findings, supported by substantial evidence, cannot be success¬
fully challenged.
40
supra, pp. 12-25, the basis in reason for the findings of the
Secretary in issuing the amendments of August 1, 1941,
providing for the payments to co-operatives. But the judg¬
ment of the lower court applies to the program as subse¬
quently amended, and the hearing record on which the Sec-
retan.’ based the subsequent amendments of August 1,1947,
dealing with payments to co-operatives, is not in the record
of this case. The amendments now in effect are different in
various respects from the original provisions for payments
to be made to the co-operatives. If the appellees seek to
attack the present provisions in the order as not being
based on substantial evidence, the attack fails because the
record on which the present provisions are based is not
before the Court. The findings of the Secretary, on the
basis of the evidence at a public hearing, carry a presump¬
tion of the existence of a state of facts justifying the action.
United States v. Rock Royal Co-operative, Inc., 307 U. S.
533, 567-568; Thompson v. Consolidated Gas Utilities Corp.,
300 TJ. S. 55, 69; Wallace v. Hudson-Duncan & Co. (C. A. 9),
98 F. 2d 985; and Queensboro Farms Products v. Wickard
(C. A. 2), 137 F. 2d 969, 977-981.
II. The Challenged Provisions Are Plainly Author¬
ized by the Act, and the Government’s Motion for Sum¬
mary Judgment Should Have Been Sustained.
The Government filed a motion for summary judgment
(Joint App. 58), and a copy of the hearing record on which
the 1941 amendments were based 20 was before the Court
with respect to the motion for summary judgment. The
scope of judicial review was limited to a review of that
record, supra, pp. 36-39; no new evidence was admissible.
Consequently the action should have been disposed of by
that motion for summary judgment. This principle was
established in Wawa Dairy Farms v. Wickard (C. A. 3),
149 F. 2d 860, 864:
29 At the time of the motion for summary judgment, the sub¬
sequent 1947 amendments had not been issued, and the hearing
record before the Court was the complete record at that time.
Even if it had not been complete, the appellees could have supplied
any omission; and summary judgment would have been proper.
41
“Summary judgment procedure was properly uti¬
lized herein. Appellant insists that the instant matter
involves genuine issues as to material facts and there¬
fore that under Rule 56 of the Federal Rules of Civil
Procedure, 28 U. S. C. A. following section 723c, its
disposition on a motion for summary judgment was
error. According to the district court’s reasoning,
since its decision had to be based on the record before
the Secretary of Agriculture and not upon a trial de
novo, it could consider that record alone whether the
case went to trial or was terminated upon motion for
summary judgment. Obviously, the summary judg¬
ment was proper.”
The bill of complaint, as amended, fails to present an
issue as to whether the provisions, in the amended order,
alleged to be illegal are not based on substantial evidence in
the hearing record on which the amended order was issued.
The sole issue presented by the plaintiffs is whether the
challenged provisions in the order are, as a matter of statu¬
tory interpretation, within the framework of the Act.
The Act authorizes “incidental . . . and necessary”
provisions, and the Secretary made findings of fact, on the
basis of the evidence before him, that the provisions for
payments to co-operatives, for market-wide services, are
incidental and necessary to the effectuation of the classifica¬
tion, pooling, and pricing provisions under § 8c(5) of the
Act, and that such payments to co-operatives, for market¬
wide services, are not inconsistent with § 8c(5). There is
no basis for concluding that, as a matter of statutory in¬
terpretation, these provisions cannot be included in a milk
order, supra, pp. 9-36.
There is no issue of fact in the case. The provisions in
the order are authorized by the Act. The Government’s
motion for summary judgment should have been granted
by the lower court and the complaint dismissed.
42
CONCLUSION
For the foregoing reasons the judgment of the lower
court, sustaining the amended bill of complaint, should be
reversed and the amended complaint should be dismissed.
J. Stephen Doyle, Jr.,
Neil Brooks,
Special Assistants to the
Attorney General;
Lewis A. Sigler,
Assistant Associate Solicitor;
Mary Connor Myers,
Attorney,
United States Department of Agriculture.
43
APPENDIX
The following are relevant sections of the Agricultural
Marketing Agreement Act of 1937 (7 U. S. C. 601 et seq.):
$ 60Se. Orders Regulating Handling of Commodity.
(1) Issuance by Secretary.
Sec. 8c. (1) The Secretary of Agriculture shall, subject
to the provisions of this section, issue, and from time to time
amend, orders applicable to processors, associations of
producers, and others engaged in the handling of any agri¬
cultural commodity or product thereof specified in subsec¬
tion (2) of this section. Such orders shall regulate, in the
manner hereinafter in this section provided, only such
handling of such agricultural commodity, or product
thereof, as is in the current of interstate or foreign com¬
merce, or which directly burdens, obstructs, or affects, inter¬
state or foreign commerce in such commodity or product
thereof.
• * « • •
(3) Notice and Hearing.
(3) Whenever the Secretary of Agriculture has reason to
believe that the issuance of an order will tend to effectuate
the declared policy of this title with respect to any com¬
modity or product thereof specified in subsection (2) of this
section, he shall give due notice of and an opportunity for
a hearing upon a proposed order.
(4) Finding and Issuance of Order.
(4) After such notice and opportunity for hearing, the
Secretary of Agriculture shall issue an order if he finds,
and sets forth in such order, upon the evidence introduced
at such hearing (in addition to such other findings as may
be specifically required by this section) that the issuance
of such order and all of the terms and conditions thereof
will tend to effectuate the declared policy of this title with
respect to such commodity.
(5) Milk and Its Products; Terms and Conditions of
Orders.
(5) In the case of milk and its products, orders issued
pursuant to this section shall contain one or more of the
following terms and conditions, and (except as provided in
subsection (7) no others:
44
(A) Classifying milk in accordance with the form in
which or the purpose for which it is used, and fixing, or pro¬
viding a method for fixing, minimum prices for each such
use classification winch all handlers shall pay, and the time
when payments shall be made, for milk purchased from
producers or associations of producers. Such prices shall
be uniform as to all handlers, subject only to adjustments
for (1) volume, market, and production differentials custo¬
marily applied by the handlers subject to such order, (2) the
grade or quality of the milk purchased, and (3) the loca¬
tions at which delivery of such milk, or any use classifica¬
tion thereof, is made to such handlers.
(B) Providing:
(i) for the payment to all producers and associa¬
tions of producers delivering milk to the same handler
of uniform prices for all milk delivered by them: Pro¬
vided, That, except in the case of orders covering milk
products only, such provision is approved or favored
by at least three-fourths of the producers who, during
a representative period determined by the Secretary
of Agriculture, have been engaged in the production for
market of milk covered in such order or by producers
who, during such representative period, have produced
at least three-fourths of the volume of such milk pro¬
duced for market during such period; the approval
required hereunder shall be separate and apart from
any other approval or disapproval provided for by this
section; or
(ii) for the payment to all producers and associa¬
tions of producers delivering milk to all handlers of
uniform prices for all milk so delivered, irrespective of
the uses made of such milk by the individual handler
to whom it is delivered;
subject, in either case, only to adjustments for (a) volume,
market, and production differentials customarily applied
by the handlers subject to such order, (b) the grade or
quality of the milk delivered, (c) the locations at which de¬
livery of such milk is made, and (d) a further adjustment,
equitably to apportion the total value of the milk pur¬
chased by any handler, or by all handlers, among producers
and associations of producers, on the basis of their market¬
ings of milk during a representative period of time.
(C) In order to accomplish the purposes set forth in
paragraphs (A) and (B) of this subsection (5), providing
45
a method for making adjustments in payments, as among
handlers (including producers who are also handlers), to the
end that the total sums paid by each handler shall equal the
value of the milk purchased by him at the prices fixed in
accordance with paragraph (A) hereof.
(D) Providing that, in the case of all milk purchased by
handlers from any producer who did not regularly sell milk
during a period of 30 days next preceding the effective date
of such order for consumption in the area covered thereby,
payments to such producer, for the period beginning with
the first regular delivery by such producer and continuing
until the end of two full calendar months following the first
day of the next succeeding calendar month, shall be made
at the price for the lowest use classification specified in such
order, subject to the adjustments specified in paragraph
(B) of this subsection (5).
(E) Providing (i) except as to producers for whom such
services are being rendered by a cooperative marketing
association, qualified as provided in paragraph (F) of this
subsection (5), for market information to producers and for
the verification of weights, sampling, and testing of milk
purchased from producers, and for making appropriate
deductions therefor from payments to producers, and (ii)
for assurance of, and security for, the payment by handlers
for milk purchased.
(F) Nothing contained in this subsection (5) is intended
or shall be construed to prevent a cooperative marketing
association qualified under the provisions of the Act of
Congress of February 18, 1922, as amended, known as the
“Capper-Volstead Act,” engaged in making collective sales
or marketing of milk or its products for the producers
thereof, from blending the net proceeds of all its sales in
all markets in all use classifications, and making distribu¬
tion thereof to its producers in accordance with the contract
between the association and its producers: Provided, That
it shall not sell milk or its products to any handler for use or
consumption in any market at prices less than the prices
fixed pursuant to paragraph (A) of this subsection (5) for
such milk.
(G) No marketing agreement or order applicable to milk
and its products in any marketing area shall prohibit or in
any manner limit, in the case of the products of milk, the
marketing in that area of any milk or product thereof pro¬
duced in any production area in the United States.
• • • • •
46
(7) Terms Common to All Orders.
(7) In the case of the agricultural commodities and the
products thereof specified in subsection (2) orders shall
contain one or more of the following terms and conditions:
(A) Prohibiting unfair methods of competition and un¬
fair trade practices in the handling thereof.
(B) Providing that (except for milk and cream to be sold
for consumption in fluid form) such commodity or product
thereof, or any grade, size, or quality thereof shall be sold
by the handlers thereof only at prices filed by such handlers
in the manner provided in such order.
(C) Providing for the selection by the Secretary of Agri¬
culture, or a method for the selection, of an agency or
agencies and defining their power and duties, vrhich shall
include only the powers:
(i) To administer such order in accordance with its
terms and provisions;
(ii) To make rules and regulations to effectuate the
terms and provisions of such order;
(iii) To receive, investigate, and report to the Secre¬
tary of Agriculture complaints of violations of such
order; and
(iv) To recommend to the Secretary of Agriculture
amendments to such order.
Xo person acting as a member of an agency established pur¬
suant to this paragraph (C) shall be deemed to be acting
in an official capacity, within the meaning of section 10 (g)
of this title, unless such person receives compensation for
his personal services from funds of the United States.
(D) Incidental to, and not inconsistent with, the terms
and conditions specified in subsections (5), (6), and (7)
and necessary to effectuate the other provisions of such
order.
The following are relevant sections of the Boston milk
marketing order, as amended (12 F.R. 4921, 7 CFR, 1947
Supp., 904.0 et $eq.):
§ 904.10 Payment to cooperative associations —(a) Appli¬
cation and qualification for cooperative payments. Any
cooperative association of producers duly organized under
the laws of any state may apply to the Secretary for a deter¬
mination that it is qualified to receive cooperative payments
47
in accordance with the provisions of this section. Upon
notice of the filing of such an application, the market admin¬
istrator shall set aside for each month, from the funds
provided by handlers ’ payments to the market administra¬
tor pursuant to § 904.9, such amount as he estimates is
ample to make payment to the applicant, and hold it in
reserve until the Secretary has ruled upon the application.
The applicant association shall be considered to be a
qualified association entitled to receive such payments
from the date fixed by the Secretary, if he determines
that it meets all of the following requirements.
(1) It conforms to the requirements relating to character
of organization, voting, dividend payments, and dealing
in products of nonmembers, which are set forth in the
Capper-Volstead Act and in the state laws under which
the association is organized.
(2) It operates as a responsible producer-controlled
marketing association exercising full authority in the sale
of the milk of its members.
(3) It systematically checks the weights and tests of milk
which its members deliver to plants not operated by the
association.
(4) It guarantees payment to its members for milk deliv¬
ered to plants not operated by the association.
(5) It maintains, either individually or together with
other qualified associations, a competent staff for dealing
with marketing problems and for providing information to
its members.
(6) It constantly maintains close working relationships
with its members.
(7) It collaborates with similar associations in activities
incident to the maintenance and strengthening of collective
bargaining by producers and the operation of a plan of uni¬
form pricing of milk to handlers.
(8) It is in compliance with all applicable provisions of
this order.
(b) Cooperative payments . On or before the 25th day
after the end of each month, each qualified association shall
be entitled to receive a cooperative payment from the funds
provided by handlers’ payments to the market administra¬
tor pursuant to § 904.9. The payment shall be made under
48
the conditions and at the rates specified in this paragraph,
and shall be subject to verification of the receipts and other
items upon which such payment is based.
(1) Each qualified association shall be entitled to pay¬
ment at the rate of 1 cent per hundredweight on the milk
w’hich its producer members deliver to the plant of a handler
other than a qualified association; except on milk delivered
by a producer who is also a member of another qualified
association, and on milk delivered to a handler who fails
to make applicable payments pursuant to § 904.9 (b) (2)
and § 904.11 within 10 days after the end of the month in
which he is required to do so. If the handler is required
by paragraph (e) of this section to make deductions from
members of the association at a rate lower than 1 cent per
hundredweight, the payment pursuant to this subparagraph
shall be at such lower rate.
(2) Each qualified association shall be entitled to pay¬
ment at the rate of 2 cents per hundredweight on milk re¬
ceived from producers at a plant operated by that associa¬
tion.
(c) Reports relating to cooperative payments. Each
qualified association shall, upon request by the market
administrator, make reports to him with respect to its use
of cooperative payments and its performance in meeting
the requirements set forth as the basis for such payments,
and shall file with him a copy of its balance sheet and oper¬
ating statement at the close of each fiscal year.
(d) Suspension of Cooperative payments. Whenever
there is reason to believe that an association is no longer
meeting the qualification requirements, the market admin¬
istrator shall, upon request by the Secretary, suspend
cooperative payments to it, and shall give the association
written notice of the suspension. Such suspended pay¬
ments shall be held in reserve until the Secretary has,
after notice and opportunity for a hearing, ruled upon the
performance of the association.
(e) Deductions from payments to members. (1) Each
association which is entitled to receive cooperative pay¬
ments on milk which its producer members deliver to a
handler other than a qualified association may file a claim
with the handler for amounts to be deducted from the
handler’s payments to such members. The claim shall con¬
tain a list of the producers, an agreement to indemnify the
49
handler in the making of the deductions, and a certification
that the association has an unterminated membership con¬
tract with each producer, authorizing the claimed deduction.
(2) In making payments to his producers for milk re¬
ceived during the month, each handler shall make deductions
in accordance with the association’s claim, and shall pay
the amount deducted to the association within 25 days after
the end of the month.
tto
ft U. «. SOVtNNNINT PRINTING OPPICCi l«4»
(•ltd
United
(Court of Appeals
Nos. 10,365 and 10,366
ON APPEAL FEOM A JUDGMENT OF TEE UNITED 8TATES
DISTRICT COURT FOB THE DISTRICT OF COLUMBIA
Edward B. Hanify,
Boston, Mass.
Harry Poukoff,
New York City
Attorneys for Appellees.
United States Court of Appeals
for the
District of Columbia Circuit
Edgar J. Goodrich
Lxpmah Bedmah
Bing Building
Washington, D. C
Of Counsel
1
INDEX
Page
COUNTERSTATEMENT OF THE CASE. 1
SUMMARY OF ARGUMENT . 5
ARGUMENT:
I. The Contested Provisions are not Authorized by,
AND ARE NOT “INCIDENTAL TO 7 ’, ANY OF THE TERMS OF
a Milk Order Prescribed in Section 8c(5). 9
II. The Cooperative Payment Provisions are Inconsis¬
tent with the Terms of a Milk Order Prescribed in
Section 8c(5) (B) and (E). 23
III. There is Nothing in Alleged Contemporaneous Leg¬
islation, Subsequent Legislative History, or other
Provisions of the Act to Support the Conclusion
that the Cooperative Payment Deduction is Au¬
thorized . 29
IV. The District Court Properly Applied Correct Prin¬
ciples Governing the Scope of Judicial Review in
this Case. 33
V. The Appellees have Standing to Sue, and the Inter-
venor-Appellant’s Charge of Champerty and Main¬
tenance is Groundless. 37
ii
CITATIONS
Page
Cases:
Adler v. Seaman, 266 Fed. 828, 842-3. 37
Carey v. Donohue, 240 U. S. 430, 437. 31
Chandler <£- Price Co. v. Brandtjen cfc Klug, Inc., 296
U. S. 53. 58 . 36
Farmer Union Coop. Supply Co. v. United States, 25 F.
Supp. 93 . 32
Federal Trade Commission v. Bunte Bros., 312 U. S. 349,
352 . 30
Interstate Commerce Commission v. Cincinnati St. Ry.
Co., 167 U. S. 479, 510. 34
John v. ('hampagne Lumber Co., 157 Fed. 407, 418.... 39
Mueller v. Adler, 292 Fed. 138. 37
Reynolds Pen Co. v. Marshall Field <£■ Co., 8 F.R.D. 314 37
Saginaic Broadcasting Co. v. F.C.C., 68 App. D. C. 282,
96 F. (2d) 554. 560 . 35
Salem Engineering Co. v. National Supply Co., 75 F.
Supp. 993 . 37
Schechtcr v. United States, 295 U. S. 495 . 15
Schuster v. Ohio Farmers’ Cooperative Milk Ass’n, 61 F.
(2d) 339 . 32
Social Security Board v. Nierotko, 327 U. S. 358, 368-369 34
Stark v. Bran nan, 82 F. Supp. 614
8, 12, 16, 17, 20, 23, 34, 36, 39, 40
Stark v. Wickard, 321 U. S. 288.8, 17, 21, 27, 34, 36, 40
Stale v. Diary Distributors Inc., 217 Wis. 167, 258 N.W.
383 . 21
Texas Pacific Ry. Co. v. United States, 289 U. S. 627,
640 . 34
United States v. Butler, 297 U. S. 1. 11
United States v. Rock Royal Cooperative, Inc., 307 U. S.
533 . 16,30
Ill
Statutes:
Page
Agricultural Adjustment Act of 1935 (Act of Aug. 24,
1935, c. 641, §5, 49 Stat., 750, U.S.C., Title 7, §601
et seq.) .30,31
Section 10(b), (U.S.C., Title 7, §610(b))... .13, 15, 31, 32
Agricultural Marketing Agreement Act of 1937 (Act of
June 3, 1937, c. 296, 50 Stat. 246, U.S.C., Title 7,
§601 et seq.) .5, 30, 31
Section 8c (4), (U.S.C., Title 7, §608c(4)). 36
Section 8c(5).5, 6, 9, 12, 16, 24, 29, 30
Section 8c(5) (A) .6, 9, 12, 26
Section 8c(5) (B).6, 7, 9,11, 12, 14, 18, 22, 23, 24, 26
Section 8c(5)(C) .26,27,31
Section 8c(5) (D) . 14,22
Section 8c(5) (E) .12, 13, 27, 28, 29
Section 8c(5) (F).13, 28, 32
Section 8c(6) (D).14,22,23
Section 8c(6) (E).7, 14, 22
Section 8c(7) . 16,30
Section 8c(7)(D) .5, 16, 18, 23, 24, 34
Section 8c(12). 13,32
Section 8c (17) . 36
Section 671, (U.S.C., Title 7, §671). 32
Capper-V olstead Act, Act of Feb. 18,1922, c. 57, 42 Stat.
388, U.S.C., Title 7, §291. 31
Clayton Act, Act of Oct. 15, 1914, c. 323, 38 Stat. 730,
U.S.C., Title 15, §17. 31
Internal Revenue Code, Act of May 10, 1934, c. 277,
§101, 48 Stat. 700, U.S.C., Title 26, §103 (12) (1934
ed.) . 31
IV
Page
New York Statutes:
Chap. 383, Laws of 1937. 30
Chap. 760, Laws of 1939. 30
Milk Orders:
Boston Order.1, 2, 3, 4, 7, 8, 18, 19, 24, 28, 29, 34, 35, 36
Dayton-Springfield Order. 25
Fall River, Mass. Order. 25
Kansas City Order. 25
La Porte County, Indiana Order. 25
Minneapolis-St. Paul Order. 25
New Orleans Order . 25
Quad Cities Order. 25
Wichita Order. 25
Committee Reports , Statements , and Proposed Bills:
79 Cong. Rec. 9461-9462, 9480 . 15
House Report No. 1241, 74th Congr., 1st Sess.. .9, 14, 15, 26, 33
House Report No. 468, 75th Congr., 1st Sess. 11
Senate Report No. 1011, 74th Congr., 1st Sess.10, 11, 16
Statement by Chairman of the House Committee on
Agriculture. 79 Cong. Rec. 9461. 15
Statements by Davis, Administrator of the Agricutural
Adjustment Act . 32,33
Senate Bill No. 3426, 75th Congr., 3rd Sess. 30
Miscellaneous:
Department of Agriculture publications. 11
3 Moore’s Federal Practice (1938) §56.09. 8
Notice of report filed by Acting Director of Food Dis¬
tribution on March 18, 1944 (9 F.R. 3057-3060). 36
6 Williston, Contracts (Rev. Ed. 1937) §1714. 39
Untteii States Gkmrt of Appeals
For the District of Columbia Circuit
October Term, 1949
Nos. 10,365 and 10,366
Charles F. Bran nan, Secretary of Agriculture,
Appellant
Dairymen’s League Co-operative Association, Inc.,
Intervenor-Appellant
v.
Delbert 0. Stark, et al., Appellees
ON APPEAL FROM A JUDGMENT OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
BRIEF FOR DELBERT O. STARK, ET AL.,
APPELLEES
COUNTERSTATEMENT OF THE CASE
The following facts found by the District Court are
material to the consideration of the question presented on
this Appeal.
Order No. 4, Regulating the Handling of Milk in the
Greater Boston, Massachusetts Marketing Area was origi¬
nally issued by the Secretary of Agriculture, effective Feb¬
ruary 9, 1936. Among other times, it was amended after
public hearings on July 28, 1941, effective August 1, 1941
(Joint App. 150).
Under Order No. 4 as originally issued and amended, all
milk sold bv dairv farmers is divided into two classes:
m
Class I, milk sold for use as fluid milk; and Class II, milk
sold for use for other purposes, such as manufacture of
2
butter and cheese (Joint App. 151). The Order creates an
equalization plan whereby every dairy farmer (generally
known as “producer”) receives a proportionate share of
the total proceeds of all milk sold in the marketing area,
irrespective of whether his milk is used by the purchaser
as Class I or Class II milk (Joint App. 151). The device by
which this object is accomplished is known as the “blended
price” (Joint App. 151). The Order provides for fixing
minimum prices for Class I and Class II milk to be paid by
the distributors, who purchase from the farmers and who
are generally known as “handlers” (Joint App. 151). Each
handler pays for the milk that he receives. The Market
Administrator, however, computes, on the basis of the
minimum prices, the value of all milk sold in the area each
month and, after making certain adjustments prescribed by
the Order, calculates a weighted average price, or “blended
price”, as it is called (Joint App. 151). Each producer is
paid on the basis of the blended price, subject again to
certain adjustments (Joint App. 151).
Before the blended price is computed, however, the Ad¬
ministrator is required to make a deduction prescribed by
the Order and to pay the amount so deducted to those pro¬
ducers that are cooperative associations of dairymen
(Joint App. 151). No similar payment is made to other
producers (Joint App. 151). Provision for this deduction
for cooperative payments was introduced into Order No. 4
as amended for the first time bv the amendment effective
on August 1, 1941 (Joint App. 151). In promulgating this
amendment the Secretary made the following finding:
“. . . that the provisions relating to the payments out
of the equalization pool to cooperative associations per¬
forming certain marketing services are incidental to,
not inconsistent with, the other provisions of the order,
as amended, and necessary to effectuate the other pro¬
visions of the order, as amended.” (Joint App. 150-
151).
3
The provisions with respect to cooperative payments, and
the accompanying deduction from producer prices, have
remained in Order No. 4 as amended from August 1, 1941
down to the present time (Joint App. 152). Slight pro¬
cedural changes have been made in them. The Secretary’s
original finding has never been amplified or amended (Joint
App. 152). The sums of money paid to the cooperative
associations under the Order have averaged approximately
one-quarter of a million dollars each year (Joint App. 152).
Equivalent amounts have been deducted in the computation
of the minimum price to producers (Joint App. 152).
The producer plaintiffs who instituted this action were
non-members of cooperative associations and had been de¬
livering milk to the Boston market for many years (Joint
App. 152). From 1941 down to the present time they have
made substantial deliveries of milk to handlers under the
Boston Order (Joint App. 153). They have an individual
interest in the sums deducted from their prices for pay¬
ments to cooperative associations. The deductions for these
payments have applied to their deliveries at rates ranging
from 1-2/10 cents per hundredweight to 2-2/10 cents per
hundredweight (Joint App. 153).
For at least a quarter of a century there has been in effect
in certain milk markets in the United States a system
known as “the base rating plan” (Joint App. 153). Under
this system each producer receives a base or quota predi¬
cated on the amount of his deliveries during a previous
representative period of time. For so much of his current
deliveries as are within this base or quota, he is paid a
higher price than that applicable to his deliveries in excess
of the quota. The base rating plan is entirely unrelated to
any plan for payments to cooperative associations out of
the equalization fund (Joint App. 153).
In order to qualify for the contested payments the Order
requires that a cooperative association be of the character
4
and perform the services which are specifically prescribed in
the following terms:
(1) It conforms to the requirements relating to char¬
acter of organization, voting, dividend payments, and
dealing in products of nonmembers, which are set forth
in the Capper-Volstead Act and in the state laws under
which the association is organized.
(2) It operates as a responsible producer-controlled
marketing association exercising full authority in the
sale of the milk of its members.
(3) It systematically checks the weights and tests of
milk which its members deliver to plants not operated
by the association.
(4) It guarantees payment to its members for milk
delivered to plants not operated by the association.
(5) It maintains, either individually or together with
other qualified associations, a competent staff for deal¬
ing with marketing problems and for providing infor¬
mation to its members.
(6) It constantly maintains close working relation¬
ships with its members.
(7) It collaborates with similar associations in ac¬
tivities incident to the maintenance and strengthening
of collective bargaining by producers and the operation
of a plan of uniform pricing of milk to handlers.
(S) It is in compliance with all applicable provisions
of this order.
(7 CFR 904.10(a) (1-8); substantially similar provi¬
sions were included in Order Xo. 4, as amended August
1, 1941, 7 CFR 904.9(a) (1941 Supp.)).
In its statement of the case, appellant refers to the co¬
operative payments as being made for “services rendered
to the market as a whole” and “market-wide services”
(Appellant’s Brief, p. 3,4). This is a serious and confusing
inaccuracy. Under the Order, the qualifying services of a
cooperative are primarily, and almost exclusively, “to its
members ’\ a phrase which the Order repeatedly uses to
5
describe them. The Secretary’s finding does not describe
them as “market-wide services”. Neither does the com¬
plaint. The Order does not call for performance by a co¬
operative of such activities as handling surplus milk, or
supplying fluid milk to proprietary handlers, or substantial
advertising, which the appellant relies on to justify the
payments (Appellant’s Brief pages 12-22).
Statements by the intervenor-appellant (pages 7-11 of its
Brief) with respect to the appellees’ interest in the litiga¬
tion are not warranted by the evidence (Joint App. 254-
363). This subject matter however constitutes a side issue
injected into the Appellate Record by the intervenor appel¬
lant. Similar charges were deliberately withdrawn by the
Secretary of Agriculture by appropriate action in the lower
Court (Joint App. 466). We reserve an accurate statement
of the testimony on this point to pages 37-40 infra, where
we discuss the materiality of this issue.
SUMMARY OF ARGUMENT.
Section 8c(5) [U.S.C., Title 7, $608c(5)] lists the terms
and conditions which may be included in milk orders under
the Agricultural Marketing Agreement Act of 1937,* Re¬
enacting, Amending and Supplementing the Agricultural
Adjustment Act as amended. It opens with the declaration
that orders “shall contain one or more of ... the terms and
conditions” which are enumerated, and, except for the cate¬
gory next mentioned, “no others.” The Secretary is au¬
thorized to insert other terms and conditions which meet
three prerequisites — they must “be incidental to, and not
inconsistent with, the terms and conditions specified” and
necessary to effectuate the other provisions of an order
[Sec. 8c(7) (D), U.S.C., Title 7, $608c(7)(D)]
The deduction from producer prices for cooperative pay¬
ments, provided for in the Boston milk order, is not one of
the terms enumerated in Section 8c(5) of the Act. The
•Act of June 3, 1937, c. 296, 50 Stat. 246, U.S.C., Title 7, § 601
et seq. Relevant sections of the Act are set out in the Appendix to
the Appellant’s Brief.
6
Statute permits the classifying of milk in accordance with
its use and the fixing of minimum prices for each use
classification [Sec. Sc(5)(A)]. These are the prices which
handlers are required to pay. They are subject only to spe¬
cifically enumerated price adjustments. The next permis¬
sible statutory term [Sec. 8c(5)(B)] permits alternate
methods of distributing the total dollar value of milk, fixed
at the classified prices, among producers and associations
of producers. The producer’s uniform or blended price
may be computed on the basis of the utilization of all milk
received by the particular handler to w 7 hom it is delivered
[Sc(5)(B)(i)] or on the basis of the market-wide util¬
ization of milk by all handlers [Sc(5) (B) (ii)]. In either
event, the price to the producer is subject “only” to spe¬
cific adjustments. The deduction for cooperative payments
is not one of these adjustments. It is also not authorized
by any of the remaining terms and conditions specified in
Section 8c(5).
The deduction for cooperative payments is not incidental
to the prescribed statutory terms. A proper construction
of the Act, in the light of its history, shows that the Secre¬
tary, as an incident of his power to fix prices, does not have
the right to subtract a portion of the price in order to make
large financial grants to cooperative associations, thereby
depriving producers of a portion of the price fixed for their
product, and forcing non-member producers to contribute to
the resources of private associations to -which they do not
belong. In the prescribed substantive terms of a milk order,
Congress has treated as major matters of policy worthy of
express legislative mandate: (1) the computation of the pro¬
ducer’s milk price and all permissible adjustments therein,
(2) the specific marketing services for which deductions are
appropriate from the price to those producers who are non¬
members of cooperatives, and (3) the rights and privileges
to be accorded cooperative associations. The Secretary may
not, in the guise of implementing these prescribed terms
7
with incidental and auxiliary provisions, add a new type of
price adjustment to those specified by the legislature, deduct
sums from non-member producers for marketing services
by cooperatives to their own members, and dissipate the
producer settlement fund, created for all practical purposes
as a trust for producers, in novel bounties to cooperative
associations.
The deduction for cooperative payments is not consistent
with the prescribed statutory terms. It is an adjustment in
the price which is not included among the “only” adjust¬
ments permitted by Section 8c(5)(B). The permissible
adjustments include those made by deduction from the total
value of the pooled milk in the process of computing the
uniform price. The statute does not proscribe only un¬
specified adjustments to the blended price after computa¬
tion. The cooperative payment deduction is also inconsistent
with the provisions of Sec. 8c(5)(E) which cover the field
of service deductions from non-member producers and spe¬
cify the marketing services for which such deductions can
be made. This term of the Act does not allow a deduction
from non-member producers for the purpose of compen¬
sating cooperatives for rendering the specified marketing
services to their own members. As written in the Order,
the deduction for cooperative payments has this effect. As
now rationalized by the appellant, it still violates paragraph
(E), which does not permit a deduction from the price to
non-member producers on account of alleged “market¬
wide” services outside the scope of the specified market¬
ing services enumerated in the Act.
It is necessary to keep steadily in mind that the services
which cooperatives are required to perform are specifically
enumerated in the Order (7 C.F.R. 904.10(a) (1-8), page 3,
4 supra); that the services, so specified, are primarily and
almost exclusively services by cooperatives to their own
members; and, that it was the provision for payment for
these services which the Secretary found to be incidental
8
to, and not inconsistent with, the other provisions of the
Order as amended, and necessary to effectuate the same.
To take money from non-member producers to pay coopera¬
tives for services to their own members is so indefensible
that the appellant does not attempt to justify such a measure
under the Act. It therefore tries to inject into the case, as
a broader basis for the payments, other and different “mar¬
ket wide” services, despite the fact that these alleged serv¬
ices have never been made the basis for the contested
payments in any official finding accompanying the promul¬
gation or amendment of the contested provisions of the
Order, and have never been required by the Order itself.
The affidavits in the Record setting forth these alleged mar¬
ket wide services (Joint App. 14, 60, 77) were not sub¬
mitted by appellant to Judge Holtzoff at the hearing on the
merits.*
The appellees maintain that the cooperative payment de¬
duction is not authorized by the Act, regardless of whether
it rests on the services prescribed by the Order, or upon
other and different “services” of the character now relied
on to support it. Our argument, as thus far outlined, applies
to the deduction whether it is considered as written in the
Order or as now rationalized in the appellant’s argument.
There is nothing in contemporaneous legislation, subsequent
legislative history, or other provisions of the Act to support
its validity. In determining its invalidity the District
Court (S2 F. Supp. 614; Joint App. 142-150) correctly ap¬
plied applicable rules of law governing the scope of judicial
review, and addressed itself to the precise question of law
which the Supreme Court considered was at issue. Stark v.
Wickard, 321 U.S. 288, 307, 311. The appellees’ standing to
sue has already been adjudicated by that tribunal, and the
intervenor’s charges of champerty and maintenance are
frivolous.
•These affidavits were printed in the Joint Appendix upon ap¬
pellant’s insistenee, and over appellees’ objection, presumably on
the theory that the appeal carries with it orders overruling mo¬
tions for summary judgment, which are ordinarily not appealable.
(See 3 Moore’s Federal Practice (1938) § 56.09).
9
L
The contested provisions are not authorised by, and are not
“incidental to ”, any of the terms of a milk order prescribed
in Section 8c(5).*
The term authorized in paragraph (A) of Section Sc(5)
permits the classifying of milk in accordance with its use
and the fixing of minimum prices for each use classification.
Paragraph (B) authorizes the payment to producers of a
uniform price computed on the basis of the use of all the
milk delivered to a particular handler or on the basis of the
market-wide utilization of milk by all handlers. The uni¬
form class prices are “subject only to adjustment for (1)
volume, market, and production differentials customarily
applied by the handlers subject to such order, (2) the grade
or quality of the milk purchased and (3) the locations at
which delivery of such milk, or any use classification thereof,
is made to such handlers.” These are likewise the “only”
adjustments in the producers’ uniform or blended price
permitted by Paragraph (B) of Section 8c(5), with one
addition. Paragraph (B) also allows:
“(d) a further adjustment, equitably to apportion
the total value of the milk purchased by any handler,
or by all handlers, among producers and associations
of producers, on the basis of their marketings of milk
during a representative period of time.”
The permissible price adjustments set forth in the Act
were explained by both the Senate and House Committees
reporting on the bill which amended the Agricultural Ad¬
justment Act in 1935 and enacted present Section 8c(5).
The House Committee on Agriculture made the following
statement (74th Congress, 1st Session, House Report No.
1241, pages 9-10):
“ Minimum prices fixed in such orders are required to
be uniform as to all handlers, subject to adjustments for
•U.S.C., Title 7, § 608c(5).
10
differences in the grade and quality of the milk deliver¬
ed, for differences in transportation costs from the place
at which delivery is made to the handler to the distribut¬
ing or processing plant, and for volume, market, and
production differentials customarily applied by hand¬
lers. The volume differential is a differential which is
paid when the operations of several country plants
are consolidated into one plant. The inconvenience
which is caused to producers by closing up plants to
which they have been delivering and requiring that
all of their milk be handled by one plant, is compen¬
sated by an additional payment to the producers. The
production differential is the differential which is paid
to a producer, compensating him for keeping his farm
and milk qualified for a city market even though his
milk may actually be going into manufactured use.
It is necessary to keep this supply of reserve milk
available for periods in which consumption of milk
goes up so that the effect is that the producers must
keep their farm in the same condition as if they were
shipping milk into the city every day. The production
differential is a payment to the farmer for performing
this function in the market.
‘‘The market differential is a differential which is
given to the producer to compensate him for deliver¬
ing his milk to a city market instead of to a country
plant. These differentials vary with the markets and
cannot be qualified as a ‘location’ differential, because
of the fact that location is usually determined on the
distance from a primary market whereas market differ¬
entials are usually paid in secondary markets.”
The Senate Report was to the same effect (74th Congress,
1st Session, S. Report Xo. 1011, p. 9-10). There is no claim
by either appellant that the deduction for cooperative pay¬
ments comes within the permitted price adjustments for
volume, market and production differentials, or that it is
an adjustment relating to quality or location.
11
As in the case of the other price adjustments, Congress
made clear the purpose of the “further adjustment” per¬
mitted by paragraph (B).
“In order to eliminate, so far as possible, violent
seasonal fluctuations in the available milk supply with
their attendant disturbing effect upon returns to pro¬
ducers, and to encourage a uniform volume of produc¬
tion throughout the year, an adjustment in payments
to producers upon the basis of their production records
during a representative period may be included in such
orders ...” (Senate Report No. 1011 (p. 11) and House
Report No. 1241 (p. 10) 74th Congress, First Session).*
In accordance with the expressed intent of Congress, the
language of subparagraph (d) of 8c(5)(B) exactly fits the
“base rating plan” as that plan is described by the Court
below in paragraph 6 of its Findings of Fact (Joint App.
153; p. 3, supra).**
The cooperative payment provisions do not purport to
apportion “the total value of milk”, or to have any rela¬
tionship to marketings of milk “during a representative
period of time.” It is impossible to bring them within this
statutory language authorizing the “entirely unrelated”
* As first enacted in 1935, the clause under discussion read “on
the basis of their production of milk during a representative
period of time” (Act of August 24, 1935; ch. 641, Sec. 5, 49 Stat.
753). When the provision was amended and reenacted as the
Agricultural Marketing Agreement Act of 1937, the word ‘pro¬
duction’ was changed to ‘marketing’ so as to avoid any implication
of the production control denounced in United States v. Butler,
297 U.S. 1 (1936) (House Report No. 468, 75th Congress, First
Session).
The Court’s description of the base rating plan is in accord
with official publications of the Department of Agriculture (“Sta¬
bility of Milk Markets” IT. S. Dept, of Agriculture Marketing In¬
formation Series D.M. (3) 1938; p. 12, Plaintiffs’ Exhibit No. 1,
in the District. Court; “Base Allotments or Quota Plans used by
Farmer’s Cooperative Milk Associations”, Farm Credit Adm. U. S.
Dept, of Agriculture M. R. No. 23, May 1940, p. 2-3, Plaintiffs’
Exhibit No. 2 in the District Court).
12
base rating plan (Joint App. 153). Indeed, the intervenor-
appellant concedes that the further adjustment authorized
by subparagraph (d) “probably relates to what is com¬
monly known as ‘base rating’ plan” (Intervenor-Appel¬
lant's Brief, p. 30). In the District Court the appellant
disclaimed any reliance on this provision as authority for
the deduction here in issue (Official Transcript of Proceed¬
ings before Judge Holtzoff, p. 18, 19). In reversing its
position in this Court, the appellant takes three words of
the provision—“equitably to apportion”—out of their con¬
text, and ignores the balance of the pertinent statutory
language which describes the base rating plan (Appellant’s
Brief, p. 27).
We have shown that the deduction for cooperative pay¬
ments does not come within any of the price adjustments
specified in paragraphs (A) and (B) of Section 8c(5).
There is no claim by either appellant that such a reduction
is authorized by any other term of a milk order enumerated
in that Section. Paragraph (E) authorizes a price deduc¬
tion for certain marketing services rendered to producers
not receiving such services from cooperative associations.
Neither appellant relies on this provision, and, as we shall
later point out, the challenged deduction is not consistent
with it.
If the deduction for cooperative payments is not ex¬
pressly authorized by any of the terms prescribed in Section
Sc(5), the question arises as to whether it is incidental to
them. As to this, the District Court held that the contested
provisions were not incidental to the authorized terms set
forth in Section 8c(5) but were “entirely independent and
of major importance” (Joint App. 148). A proper con¬
struction of the Act in relation to these provisions supports
the conclusion of the District Court.
In the first place, the Act itself shows very clearly the
type of subject matter which Congress placed in the cate¬
gory of the prescribed provisions of a milk order and
13
outside the scope of any discretionary power in the Secre¬
tary. Adjustments and deductions affecting the computa¬
tion of the uniform price to producers were set forth in
minute detail. Congressional committees, as we have seen,
were at pains to explain the meaning of the allowed
“location”, “volume”, “market” and “production” differ¬
entials. That which touched the computation of the
farmer’s milk check was a matter for express prescription
by the legislator.
Congress did not consider the rendering of services to
producers not served by cooperatives, and the making of
appropriate price deductions therefor, as an “incidental”
term of a milk order. It dealt with this subject with the
utmost particularization, carefully describing the services,
as a substantive term of a milk order, in Section 8c(5)(E).
Neither did Congress consider the privileges and rights
to be accorded cooperative associations under a milk order
as an incidental matter. Again, it dealt with this subject
carefully and explicitly as a substantive matter in Section
8c(5)(F). The Act is replete with other instances where
the rights and privileges of cooperatives were spelled out in
detail (See U.S.C., Title 7, §§ 60Sc(12) and 610(b) (1)).
In each instance when Congress dealt with (a) deductions
from producer prices, (b) marketing services to non¬
member producers and (c) the rights and privileges of co¬
operatives, it did not treat these subjects as incidental
features of an order falling within the ambit of administra¬
tive discretion. They were placed in the category of the
prescribed major terms of an order. They were put in the
realm of primary things, not made to pertain to other pro¬
visions and not designed to be auxiliary to terms otherwise
specified.
Congress similarly explicitly prescribed authorized pro¬
grams relating to the problems of the creation or disposal
of a surplus of any commodity. With respect to commodi-
14
ties other than milk, it specifically authorized provisions in
an order, “determining the existence and extent of the
surplus . . . , providing for the control and disposition of
such surplus, and for equalizing the burden of such surplus
elimination or control among the producers and handlers
thereof” (U.S.C., Title 7, ^6080(6) (D)), and also made spe¬
cific provision for the rendering of the service of maintain¬
ing reserve supplies (U.S.C., Title 7, $608c(6) (E)). Signifi¬
cantly, no such terms were authorized for inclusion in orders
regulating milk.
Congress was not oblivious of the seasonal surplus in
milk production. It sought to “eliminate, so far as pos¬
sible, violent seasonal fluctuations in the available milk
supply” by “encouraging a uniform volume of produc¬
tion throughout the year”, and, to this end, specifically
authorized a price adjustment under the familiar “base
rating plan” (House Report No. 1241, 74th Congress, 1st
Session, p. 10). It prevented “assaults upon the price
structure by the sporadic importation of milk from new
producing areas” by an authorized term limiting the price
to new producers for ninety days to that fixed for manu¬
factured milk (House Report No. 1241, p. 11; Sec. 8c(5)
(D)). Apart from these provisions, the problem of surplus
milk was handled through the vehicle of the authorized
term permitting market-wide equalization, and a blended
price to each producer computed on the basis of the entire
surplus in the market (Sec. 8c(5)(B)). With respect to
commodities other than milk, Congress considered that
“the chief obstacle to the attainment of the declared policy
is the existence of market supplies far in excess of quantities
sufficient to meet an effective consumer demand” (House
Report No. 1241, p. 11). With respect to milk and its
products, Congress considered surplus to be a seasonal
factor. In both cases, however, Congress placed appro¬
priate and carefully considered programs for dealing with
the problem of surplus within the specifically enumerated
terms of orders. Even the method of paying expenses in¬
curred in carrying out such authorized programs was not
15
left to any “incidental” power of the Secretary, but was
explicitly provided for by the Statute (U.S.C., Title 7, $610
(b)(2)).
The pertinent legislative history further shows that the
basic provisions of the Act were passed in 1935 with a clear
intention, demonstrated in the Congressional debates and re¬
ports, to delegate only very limited powers to the Secretary
of Agriculture (79th Cong. Rec. 9461-9462, 9480). During
the process of the legislative evolution of the provisions of
this Statute, the Supreme Court decided the Schechter case
(Schechter v. United States , 295 U.S. 495), invalidating
provisions of the National Industrial Recovery Act because
of the failure of Congress to prescribe therein the powers
granted to the administrative authority. Pending bills to
supplement and amend the Agricultural Adjustment Act
were thereupon revised. H.R. 8492, the substantial form in
which the legislation passed Congress, finally emerged from
the Committee as the product of this process of revision.
In this process, precise delegation of legislative authority
to avoid the ban of the Schechter case was the dominant
Congressional consideration. As the Chairman of the
House Committee on Agriculture which reported the bill
said on the Floor (79 Cong. Rec. 9461) :
“We have undertaken to set out specifically just
what these orders may and may not contain, thus fur¬
nishing a definite yardstick to guide the Department
of Agriculture in making out the program under these
‘orders’.”
Other Committee members joined in expressing this inten¬
tion. It appears clearly in the Report of the House Com¬
mittee accompanying H.R. 8492 (House of Representatives,
74th Congress, 1st Session, Report No. 1241, June 15,
1945). The Senate report on the same legislation states:
“To eliminate questions of improper delegation of
legislative authority raised by the decision in Schechter
16
et al v. United States, the provisions relating to orders
enumerate the commodities to which orders issued by
the Secretary of Agriculture may be applicable, pre¬
scribe fully the administrative procedure to be fol¬
lowed by the Secretary in issuing, enforcing and termi¬
nating orders, and specify the terms which may be
included in orders dealing with the enumerated com¬
modities." (74th Congress, 1st Session, May 3, 1935)
(Calendar Day July 13) (italics supplied).
In the Rock Royal case, 307 U. S. 533, 575, the Supreme
Court recognized the intent of Congress to prescribe limits
in the Act to administrative action. The Court said:
“Here the terms of orders are limited to the specific
provisions, minutely set out in Sc(5) and (7). While
considerable flexibility is provided by 8c(7)(D), it
gives opportunity only to include provisions auxiliary
to these definitely specified.”
In the Appellant’s view, matters which the Act expressly
prohibits are the only provisions “which, as a matter of law,
cannot be included under the incidental and necessary au¬
thorization in Sec. Sc(7)(D) of the Act” (Appellant’s
Brief, p. 2S). This construction is very clearly opposed to
that of the Supreme Court, limiting the authority of Section
Sc(7)(D) “only to include provisions auxiliary to those
definitely specified.” The Court below followed the Su¬
preme Court in refusing to accept the appellant’s extreme
view of his administrative powers. In entire harmony with
the legislative history of the Act, as well as the normal and
accepted meaning of the language used in Section Sc (7) (D),
the District Court said:
“. . . The word ‘incidental’ means minor, auxiliary, or
subordinate to a principal or primary subject. A thing
incidental to an express provision is dependent or an¬
cillary to it. The term does not comprehend something
additional to and independent of the principal subject
matter. It relates solely to matters of a subordinate
nature inherently forming a part and parcel of the main
topics.” (Joint App. 147).
17
And the District Court held:
“A provision for making substantial deductions from
the equalization pool and paying them to cooperative
associations can hardly be construed as incidental to the
other parts of the Order. It is entirely independent and
is of major importance.” (Joint App. 148).
There is certainly nothing incidental about the economic
impact of the contested provisions. The sums of money
taken from producers and paid to cooperative associations
under the Boston Order have averaged one-quarter of a
million dollars each year (Joint App. 152). The deduction
has been “a burden on every area sale”, as the Supreme
Court earlier characterized it. Stark v. Wickard, 321, U.S.
288, 303. In the Boston market it has already transferred
over one and a half million dollars to cooperative associa¬
tions in deductions from producers’ milk prices. Milk pro¬
ducers are thereby made enforced contributors to the re¬
sources of private associations to which they do not belong.
Viewed under every pertinent aspect, the cooperative
payment provision departs from the nature of an “inci¬
dental” term. It creates a new price adjustment, although
the Act carefully prescribes the only allowable price adjust¬
ments in the enumerated terms. It provides for a novel
money bounty to cooperative associations, although the Act
spells out cooperative rights and privileges. Despite the
fact that the Act expressly prescribes, in the enumerated
terms, the precise services to non-member producers for
which a price deduction may be made, the cooperative pay¬
ment deduction is predicated upon an entirely different
category of alleged services to non-member producers.
Although the Act specifically places programs for dealing
with the problem of surplus in the realm of its major and
express authorized terms, the Appellant now rationalizes
the contested deduction as a program related to the main¬
tenance and disposition of surplus milk supplies.
18
The Secretary’s original and only statutory finding did
not specify any particular provision of the Act or Order
to which the cooperative payment deduction was incidental.
Indeed, at various times officials of the Department of Agri¬
culture have indicated that the deduction was originally
promulgated in reliance on a truncated portion of the lan¬
guage of Section 8c(5) (B) (ii) (d) authorizing the base
rating adjustment, rather than as an incidental term under
Section Sc(7)(D) (See Joint App. 28, 96-97; 9 F.R. 3057-
3060 (1944)). The appellant currently furnishes as the
primary rationale of the contested provisions the alleged
“market-wide” services of cooperative associations in
maintaining a reserve supply of milk, with attendant sales
of fluid milk to proprietary handlers in the short season, and
the maintenance of facilities for manufacturing surplus
milk in the flush season (Appellant’s Brief, p. 12-20).
In the first place, Order No. 4 as amended does not re¬
quire that cooperatives process surplus or sell milk in short
supply as conditions for the receipt of the payments here in
issue, which are made upon the basis of other and quite
distinct activities and functions (7 C.F.R. 904.10(a) (1-8),
set out on pp. 3-4, supra). Manifestly the Order does not en¬
courage the rendition of services which it fails even to men¬
tion. Indeed, if services not mentioned or required by the
Order supply the rational link between provisions for co¬
operative payments and the Act, it must follow that the
actual provisions of Order No. 4 are far removed from
statutory sanction.
In the second place, there is an important feature of the
manufacture of surplus and the sale of fluid milk in short
supply to which the appellant never adverts, although the
record in this case manifests it clearly. These activities
are business operations carried on by handlers whether
cooperative or proprietary, voluntarily, and for profit.
Handlers can and do recover in the normal channels of
trade, through the prices charged in selling fluid milk, the
19
cost of any alleged service in maintaining a standby supply
of milk. Indeed the manufacturing operation itself may
be more profitable at times than the disposition of milk in
fluid form.* Certainly payments to handlers for engaging
in self supporting and even profitable business operations
constitute a pure subsidy, neither incidental or necessary
to any provision of the Act or Order. With an obvious
recognition of these factors, the appellant’s representative
and economist (Joint App. 14) suggested at the original
hearing that any payments to cooperatives must be sur¬
rounded with certain “necessary” conditions: they must
sell milk to other handlers at the Class I price without a
premium; maintain the availability of their supplies, free
from the ties of long term contracts; and willingly accept
all milk without a market (Joint App. 198, 199). However,
the provisions of the Order were written with no such
conditions attached to the receipt of payments. The co¬
operative associations receiving payments were free to
and did charge premium prices on fluid milk sales to other
handlers (Joint App. 92, 93, 94, 104, 374, 419). In practice,
and under Order No. 4 as written, the cooperative pay¬
ments are stripped of any aspect of compensation for the
performance of a service function to other handlers or
to the market.
* See frank statement by witness Thompson (Joint App. 200)
“... We want to stand ready to supply fluid milk. I am not trying
to represent that our motives in that respect are entirely benevo¬
lent. They are in the interest of our members ...” (See Joint
App. 38, 39). There has never been any provision of law fixing or
regulating the maximum price which cooperatives might charge
for milk sold by them to other handlers, or for services rendered in
connection with such sales (Request for Admission of Facts #7,
Joint App. 92, 93). Cooperatives have exacted premiums over
the Class I price in selling fluid milk to other handlers (Joint App.
38, 104, 374, 419). As to the manufacturing of surplus, the ap¬
pellant states (Brief p. 15), “In some instances, it may be more
profitable to the handler, although not more profitable to the pro¬
ducers. to utilize the milk in a lower class.” (See also Joint App.
38, 39).
20
Finally, even if the cooperative payment provisions of
the Order were recast to require the activities now relied
on to support them, and to contain the necessary conditions
suggested by the Secretary’s representative at the original
hearing, they would still fall outside the scope of an “inci¬
dental term” under the Act. For even thus recast in a new
and different form they would represent an attempt by
the Secretary to use his power to fix and equalize producer
prices as a means of granting funds to support those
factors which he deems to be stabilizing and helpful in the
marketing of milk. Congress has given him no such power
under this Act. As the District Court said:
“ . . . No doubt the Congress, if it chose to do so,
might have granted subsidies to them (cooperatives)
out of public moneys. Conceivably, it might possibly
have provided that subventions should be paid to them
out of the common fund created under the Milk Orders.
The Congress has, however, done neither. An officer
of the Executive branch of the Government, by an
administrative order, has directed that out of the pool
belonging in equity to all of the milk producers, a
certain amount should be deducted and paid to coopera¬
tive associations, thus depriving the remaining pro¬
ducers of a portion of the money that would otherwise
be paid to them. Obviously, no matter how well in¬
tended, or even how desirable his action might be, an
Executive officer of the Government may not overstep
the statutory limitations on his authority. He may
not take the property of one person and give it to an¬
other.” (Joint App. 147).
There are no doubt a variety of activities which stabilize
milk markets and inure to the benefit of producers, hand¬
lers and consumers. The dealer who expands the consumer
demand for fluid milk by an aggressive sales policy, the
Dairy Council which advertises milk and dairy products,
the Dairy Herd Improvement Associations, the State Agri¬
cultural Colleges, all engage in activities which an honest
administrator might determine on satisfactory evidence
21
have as helpful and fruitful an impact on the economic
problems of the milk market and the dairy farmer as the
appellant ascribes to the activities of cooperative asso¬
ciations. Whether these activities are entitled to extra¬
ordinary financial grants, and, if so, upon whom the burden
of their support shall fall, are typically matters falling
within the legislative domain.
In the present Act Congress has granted the Secretary
power to classify milk according to its use and to fix prices
for milk in such use classification. The power to fix a price
in accordance with statutory standards does not have as
its incident the power to subtract from the price fixed in
order to raise and disburse funds for public, or quasi-public
purposes. The power to levy a sales tax (Stark v. Wickard,
321 U.S. 288, 303) is not auxiliary to the power to fix a price.
In State v. Dairy Distributors Inc., 217 Wis. 167, 258
N. W. 383, the Supreme Court of Wisconsin considered the
requirement of a State Milk Order that all dealers and
producers should contribute one half cent per hundred
pounds to the Milwaukee Dairy Council. The basic statute
authorized, inter alia, the prescribing of price schedules
at which milk or cream might be bought and sold, and gave
the administrative Board power to carry out the provisions
and intent of the Act and “to do all things reasonably
necessary and convenient” in the exercise of that power.
The Court held that the Order provisions for contribution
to the Dairy Council were invalid.
The Court said:
“If the legislature intends to confer upon adminis¬
trative bodies the power not only to fix just and reason¬
able prices for milk and cream, but also the power to
set up independent agencies for the promotion of the
business aspects of the industry and compel all persons
selling milk in the metropolitan area to contribute, that
intent should be expressed in clear and unmistakable
22
terms. The exaction made is not in any way related
to the expense of administering or enforcing the law,
nor is it paid into the public treasury, nor is the agency
to which it is paid required to make any accounting to
the contributors to the fund. We shall not determine
whether or not the legislature itself could make a valid
enactment of like character because the question is not
presented upon this record. It is clear that the legis¬
lature has attempted to confer no such power upon the
commission by sec. 99.165.”
In the present case, there is even less reason for finding
in the power to fix prices an auxiliary power to finance the
activities of private corporations in handling surplus milk.
When Congress intended that the Secretary should pro¬
mulgate programs for the establishment of reserve supplies
of commodities, it authorized them in “clear and unmis¬
takable terms” as major prescribed terms of an Order
(U.S.C., Title 7, §608c(6) (E)). It also expressly authorized
measures “for equalizing the burden of surplus elimination
or control among producers and handlers” (U.S.C., Title 7,
§60Sc(6) (D)). Significantly, it authorized such programs
only with respect to “other commodities” than milk. As
to milk, it regarded the surplus problem as seasonal and
again expressly prescribed the measures it deemed appro¬
priate to meet this seasonality. These measures, carefully
and explicitly authorized, were a price adjustment in favor
of the producer who evened out his yearly production, a
lower price for the market newcomer, and a blended price
to all regular producers, reflecting the market surplus as
it exists from time to time (Sec. 8c(5)(B) and 8c(5)(D)).
The Secretary has devised an additional and different
program directed to the problem of surplus milk and reserve
supplies, which consists in subsidizing the processing and
handling thereof. The wisdom of such a program is typically
a matter of legislative judgment. In carrying it out, the
Secretary has further decided that the onus of its financial
support shall rest, not on handlers or consumers, but ex-
23
clusively on producers through a deduction in their milk
prices. Here again he has arrogated to himself a legislative
prerogative and decided the question quite differently from
the only analogous pronouncement of the legislature. For,
when Congress did expressly authorize measures “for
equalizing the burden of surplus elimination or control”,
in the case of other commodities, it was careful to specify
that “handlers” as well as producers should share the
burden, (U.S.C., Title 7, §608c(6) (D)). In effect, the Secre¬
tary has attempted to write a new substantive term into
the Statute, with little regard to its harmony with existing
statutory prescriptions.
n.
The cooperative payment provisions are inconsistent icith
the terms of a Milk Order prescribed in Section 8c(5)(B)
and (E).
Section 8e(5)(B)*
The District Court, in discussing the cooperative payment
deduction, declared:
“Moreover, the provision can hardly be said to be
‘not inconsistent’ with the terms and conditions ex¬
pressly specified in the statute. The statute provides
that the price shall be subject to adjustments only for
enumerated factors. There is no provision for an ad¬
justment by way of a deduction in favor of cooperative
associations.” (Joint App. 148).
We submit that the District Court was correct, and that
the cooperative payment adjustment is inconsistent with
the express provisions of Section 8c(5)(B).
Both appellants insist on attributing to the District Judge
a failure to observe that the limitation in Section 8c(5) to
the effect that a Milk Order shall contain enumerated terms
and conditions and “no others” is qualified by the ex¬
ception for terms and conditions authorized under Section
8c(7) (D) (Intervenor-Appellant’s Brief, p. 29; Appellant’s
Brief, p. 26). The court’s opinion shows no such oversight.
•U.S.C. Title 7, §608c(5)(B).
24
The appellant insists, however, that the exception in Section
Sc(5) for an “incidental and necessary provision” under
Section Sc(7)(D) permits a price adjustment “in addition
to those in Section Sc(5) ” (Appellant's Brief, p. 26). It is
the appellant who thereby “overlooks” pertinent statutory
language. Section Sc(7) (D) requires that any term author¬
ized thereunder shall be “not inconsistent with the terms
and conditions” specified in Section 8c(5). An incidental
term which is inconsistent with the terms and conditions
specified in Section Sc(5) has no entry into a Milk Order
under Section Sc(7)(D). Section Sc(5)(B) expressly pro¬
vides that producer prices shall be subject “owZ?/” to speci¬
fied adjustments. Consequently, a provision for a further
and unspecified adjustment is inconsistent with Section
8c(5) (B) and, by that very token, unauthorized by Section
Sc(7)(D). The District Court correctly held that a price
adjustment by way of a deduction in favor of cooperatives
was not among the only permissible price adjustments
specified in Section 8c(5) (B). (See pages 9-12, supra, where
the meaning of these adjustments is discussed).
To escape the inconsistency inherent in the establishment
of a price adjustment outside of those specified in Section
8c(5)(B), the appellants argue that this provision of the
Act applies only to adjustments to the blended price after
it has been computed, not to adjustments by way of deduc¬
tions in the process of computation (Appellant’s Brief, pp.
26-27; Intervenor-Appellant’s Brief, pp. 30-31). This argu¬
ment is based on an incorrect assumption. The inter-
venor’s statement (Intervenor-Appellant’s Brief, p. 31)
“All of the foregoing listed deductions are made after
determination of the blended or pool price to be distributed
to producers” is completely erroneous. Several of the
authorized price adjustments such as the base rating ad¬
justment and those for grade, quality and location differ¬
entials are made in precisely the same manner as the co¬
operative payment deduction under the Boston Order as
amended, viz, by subtraction from the total value of the
25
pooled milk prior to the final computation of the uniform
price to producers.* The cooperative deduction could be
accomplished, with less administrative convenience, by a
subtraction from the final blended price payable to indi¬
vidual producers, as well as by the easier method used, of
subtracting the total amount of the required payments in
the computation of the blended price. The validity of the
deduction can scarcely depend upon the mathematical
process adopted. In any event, under the Act any distinc¬
tion between adjustments in the computation, and after the
computation of the blended price is fanciful. The Act
authorizes certain specific adjustments which the Secretary
regularly carries out by deduction in the process of com¬
puting the price. It does not refer only to adjustments in
the uniform price after its computation.
# The provision of Orders which contain the base rating ad¬
justment shows that this adjustment is accomplished by a sub¬
traction from the total value of the pooled milk before a uniform
price is computed (New Orleans Order, Sec. 942.7 (c), 14 F.R. 5960,
5962 (1949), and Wichita Order, 7 C.F.R. 968.7(b)). See also
“base rating” provisions as previouslv contained in the follow¬
ing Orders: Fall River, Mass., 7 C.F.R, 905.8(b)(2) (1938);
Kansas City, 7 C.F.R. 913.8(b)(2) (1938); LaPorte County, In¬
diana, 7 C.F.R. 920.8(b) (2) (3) (1938), Quad Cities, 7 C.F.R.
944.7(b) (2) (3) (4) (1940 Supp.). The appellant, in his Brief
(p. 30) submitted to the District Judge, after describing the base
rating adjustment, stated: “This differential is subtracted from
the total use value of the milk in the pool before the blended
price is calculated and results in one group of producers receiving
a higher price for their milk because of the dependability of their
supply.” The price adjustment for butterfat which is authorized
as a grade or quality differential under Section 8c(5) (B) (ii) (b)
may also be accomplished by a deduction from the value of the
pooled milk before computation of the uniform price (See Quad
Cities Order, 7 C.F.R. 944.7(b)(3), Davton-Springfield Order,
7 C.F.R. 971.7(c)(4) and Minneapolis-St. Paul Order, 7 C.F.R.
973.7(b)(2)). Several existing orders contain provisions for de¬
ductions from or additions to the use value of handlers’ milk of
an amount equal to the total location differentials, which are also
permissible adjustments to producers’ prices under the Act. This
addition or subtraction is made before division by the total quan¬
tity of milk to determine the blended price to producers. (See
Boston Order, 7 C.F.R. 904.8(b)(4) and Minneapolis-St. Paul
Order, 7 C.F.R. 973.7(b)(1)).
26
Finally, in order to reconcile an unspecified price deduc¬
tion with the Act, the appellant contends that the Act con¬
tains no requirement “that the uniform prices to producers
must reflect the total utilization of milk received by handlers
and priced under the Order”, or “that the total amount
paid to producers must equal the value of the milk pur¬
chased by handlers at the prices specified in the order”
(Appellant’s Brief, pp. 26-27). On this theory, Congress
has meticulously regulated adjustments in the prices hand¬
lers pay, and in the prices producers receive; but, having
guarded the monetary value of the producer’s milk from
unspecified diversions as the money comes in, and as it
goes out, has left the fund entirely unprotected from un¬
specified diversions immediately after it comes in and
immediately before it goes out.
Such a contention undermines the whole purpose and
integrity of the Act. It ignores the primary fact that the
price fixing provisions of the Act provide for the payment
“to producers'* of the prices payable for their product.
The elaborate standards of the Act for the establishment
of minimum classified prices become illusory if the pro¬
ducer’s price does not “reflect the total utilization of milk
received by handlers and priced under the Order.” The
Congressional Committee reporting on the provisions of
Section Sc(5)(B) (i) and (ii) described them as furnishing
“alternative methods of distributing the total dollar value
of all milk sold in the market among the producers supply¬
ing the market ” (italics supplied) (House Report No. 1241,
74th Congress, 1st Session, p. 10). In order to preclude
any failure by producers to receive the full use value of
the pooled milk. Congress expressly provided in Section
8c(5)(C) for adjustments in payments among handlers “to
the end that the total sums paid by such handler shall
equal the value of the milk purchased by him at the prices
fixed in accordance with paragraph (A) hereof” (italics
supplied). Hence, both the language of the Statute as well
27
as the accompanying pertinent declaration of legislative
intent directly repel the contention of the appellant that
the Act does not require “that the total amount paid to
producers must equal the value of the milk purchased by
handlers at the prices specified in the Order.’’ Section
8c(5)(C) authorizes the establishment of the “producer
settlement” fund. The Order has always described pay¬
ments into that fund as payments “to the producer through
the market administrator”. See Stark v. Wickard, 321 U.S.
288, 301. As the Supreme Court has said in this case (321
U.S. 288, 305):
“The situation would be substantially the same if an
administrator received as trustee for the producers
the purchase price of their milk, paid expenses in¬
curred in the operation and paid the balance to the
producers.” (italics supplied).
and again (321 U.S. 288, 309):
“The producer settlement fund is created to meet
allowable deductions by the payment of a part of the
minimum price to producers through the market ad¬
ministrator.” (italics supplied).
The producer settlement fund is thus treated by the
Supreme Court, for all practical purposes, as a trust fund
for producers, created to insure that handlers pay to
producers the full value of their milk at the classified prices
subject only to allowable deductions.
Section 8c(5)(E) #
The deduction for cooperative payments is inconsistent with
the provisions of Section 8c(5) (E) in the following respects:
1. Paragraph (E) provides for a deduction from pro¬
ducer payments on account of the rendering to the producers
from whom the deduction is made of enumerated services,
•U.S.C., Title 7, § 608c(5) (E).
28
viz, market information, verification of weights, sampling
and testing of milk. In the case of producers who are not
members of cooperative associations, the Order authorizes
a deduction, which is not only unrelated to the rendering
to these producers of the services enumerated in the Act,
but is used to make payments to cooperative associations
who qualify for their receipt by rendering the enumerated
services only to their own members. The Order requires
that a cooperative association, receiving the payments,
“check the weights and tests of milk which its members
deliver” and maintain a staff “for providing information
to its members ” (See 7 C.F.R. 904.10 (3) (5), page 3 supra).
2. Paragraph (E) covers the field of service deductions
from producers who are not members of cooperative asso¬
ciations. It permits only those deductions which are “ap¬
propriate” for the services which it enumerates. Hence,
when the appellants contend that the cooperative pay¬
ments rest on the basis of certain “marketwide services”
of cooperatives, such as handling surplus milk, making
sales of fluid milk to proprietary handlers, testimony at
public hearings, they treat the deduction as being made
for functions distinctly different from those services enum¬
erated in the Act as the basis for appropriate deductions
from the payments to non-member producers.
3. The cooperative payment deduction distorts the ’whole
purpose of Paragraph (E). That paragraph permits ap¬
propriate deductions for the services specified “except
as to producers for whom such services are being rendered
by a qualified cooperative”. Congress put cooperative
members and non-members in distinct categories. For
services rendered to members cooperatives may receive
compensation through contract. Their full power to dis¬
tribute the proceeds of their sales in accordance with their
contracts was protected by Paragraph (F) of Section 8c
29
(5). Congress undoutedly considered that cooperatives in
practice did not render to non-member producers the
marketing services which it enumerated, and authorized
the Secretary to provide them. Prior to the insertion of
the cooperative payment provision, the Order did provide
for the rendition of these services by the Market Adminis¬
trator with an appropriate deduction from payments to non¬
members (7 C.F.R. 904.10 (1938)). The Market Adminis¬
trator is now required to furnish to producers, consumers
and handlers “statistics and information concerning the
operation of the Order” (7 C.F.R. 904.2 (d)(7)). The Or¬
der makes no other provision for furnishing to non-mem¬
ber producers the services specified in paragraph (E). The
Secretary, acting on the assumption that he can deduct
sums of money from payments to non-member producers
to compensate cooperatives for services of a character not
specified in the Act, actually requires the cooperatives to
render services of the character specified in the Act only
to their own members to qualify for the payment.*
m.
There is nothing in alleged contemporaneous legislation ,
subsequent legislative history, or other provisions of the Act
to support the conclusion that the cooperative payment deduc¬
tion is authorized .
We have previously discussed the legislative history of
the pertinent statutory provisions (pp. 15-16, supra). We
now examine extrinsic factors relied on by appellants as
aids to construction.
• The Secretary did not purport to find that the challenged de¬
duction was “not inconsistent” with the terms and conditions speci¬
fied in Section 8c(5). He merely found that the challenged provi¬
sions are incidental to and not inconsistent with “the other pro¬
visions of the order.” (See page 2, supra). As there is no term
included in the Order pursuant to Section 8c(5)(E), the Secre¬
tary avoided any finding that the challenged provisions are not
inconsistent with terms authorized by that paragraph.
30
1. Alleged “Contemporaneous Legislation”, (Inter-
venor-Appellant’s Brief, pp. 39-42)
New York did not authorize a deduction for cooperative
payments until 1939 (Chap. 760, Laws of 1939). Such a
deduction was not authorized by the New York statute effec¬
tive in 1937 (Chap. 383, Laws of 1937). The pertinent
provisions of Section 8c (5) and (7) were enacted by Con¬
gress by amendment to the Agricultural Adjustment Act,
approved August 24, 1935 (Act of Aug. 24, 1935, c. 641, § 5,
49 Stat. 750, U.S.C., Title 7, § 60Sc(5),(7)) and were re¬
enacted with one slight change by the Agricultural Mar¬
keting Agreement Act of 1937 (Act of June 3, 1937, c. 296,
§ 2, 50 Stat. 246). Obviously, Congress in 1935 could not
have considered action in the New York legislature in 1939.
2. Subsequent Legislative History.
Both appellants argue that the legislative history of a
Bill proposed in 1940 (S. 3426, 76th Congress, 3d Sess.)
supports their construction of the Act. This bill, which
would have authorized payments out of the producer settle¬
ment fund to cooperatives and other handlers, failed of
passage, although the Secretary requested its enactment.
Naturally, its proponents were guarded and self serving as
to the Secretary’s existing powers, with the cooperative
payments of the New York Order already challenged in
the Courts. United Siates v. Rock Royal Cooperative , Inc.,
307 U. S. 533. The District Court realistically pointed out
that “the Secretary must have had some doubt as to his
power in the matter. Else he would not have asked for sup¬
plemental legislation expressly conferring such powers”
(Joint App. 149-150). In any event, statements of the spon¬
sors of proposed amendatory legislation which fails do not
indicate the intention of Congress in enacting the basic
Statute years before. Indeed, the fact that a bill to amend
fails of passage usually indicates legislative disapproval
of its terms. Federal Trade Commission v. Bunte Bros.,
31
312 U. S. 349, 352; Carey v. Donohue, 240 U. S. 430, 437.
The terms of the proposed amendment also emphasized
the inherent weakness of resting the contested provision on
the Secretary’s “incidental” powers. It would have placed
the authority for the contested payments with the other
substantive terms in Section Sc(5)(C) and would have cre¬
ated some legislative standards regulating the nature of
the services involved and handlers’ qualification for pay¬
ments. Despite the claims here asserted that these services
are peculiar to cooperative associations, the proposed legis¬
lation would have permitted proprietary handlers to draw
payments out of the pool for diverting surplus milk in
periods of excess supply, and for furnishing fluid milk in
times of insufficient supply.
3. Section 10(b)(1) of the Agricultural Adjustment
Act*
This provision enjoins only such recognition and en¬
couragement of cooperative association “as will be in har¬
mony with the policy toward cooperative associations set
forth in existing Acts of Congress”. There was, and is, no
policy set forth in Acts of Congress favoring the support of
cooperatives by enforced contributions from non-member
producers, rather than by voluntary self help. Exemptions
from anti-trust laws under the Clayton and Capper Vol¬
stead Acts and from the payment of Federal income taxes
are a far cry from ‘ ‘ subventions out of the co mm on fund cre¬
ated under Milk Orders” (Joint App. 147). The policy of
Congress has been to require equality of treatment for mem¬
bers and non-members. To require a non-member to be¬
come a member has been held to violate that equality of
•Section 10(b)(1) of the Agricultural Adjustment Act was in¬
corporated into the Statute in 1935 (Act of Aug. 24, 1935, C. 641,
§16, 49 Stat. 750, U.S.C., Title 7, §610(b) (1)) by way of amend¬
ment to the Agricultural Adjustment Act, (Act of May 12, 1933,
c. 25, 48 Stat. 31) as previously amended. It was not expressly
reenacted by the Agricultural Marketing Agreement Act of 1937
(Act of June 3, 1937, c. 296, 50 Stat. 246).
32
treatment requisite to tax exemption. Farmer Union Coop.
Supply Co. v. United States, 25 F. Supp. 93. A fortiori,
Congress would not deem it equality of treatment to require
a non-member to pay for cooperative activities as if he were
a member.
“There is nothing broadly eleemosynary in cooperative
associations. They simply represent a banding together
of producers for their common good, and the motive of each
is pecuniary gain". Schuster v. Ohio Farmers’ Cooperative
Milk Ass'n, 61 F. 2d 339. A requirement that non-member
producers pay a portion of their milk price to these asso¬
ciations is a sweeping economic and social innovation. The
intervenor’s diligence produced but one isolated and doubt¬
ful instance of the “check off" principle as applied to non¬
members in favor of cooperatives, in all the milk markets in
the country prior to Federal Regulation; and even with the
Secretary of Agriculture walling to sanction this principle,
it was in operation in only four out of twenty-nine markets
under Federal Orders in late 1946 (Joint App. 102). Had
Congress wished to introduce the “check off" principle
into milk marketing it would have done so in the specific
language with which it granted other important privileges
to cooperatives under the Act. (See U.S.C., Title 7,
§§ 608c(5) (F), 608c(12), and 671).
The legislative history of Section 10(b)(1) shows that it
was intended to safeguard, rather than to enlarge, existing
cooperative privileges.
At the hearing before the Committee on Agriculture,
House of Representatives, 74th Congress, First Session, on
H. R. 55S5, February 26 to March 6,1935, Chester G. Davis,
Administrator of the Agricultural Adjustment Act, testi¬
fied as follows respecting this provision (p. 16):
“The inclusion of this language would make explicit
the policy now being followed by the Agricultural Ad¬
justment Administration but would neither extend nor
limit the authority of the Secretary."
33
Mr. Davis further testified as follows (p. 42):
“Mr. Kleberg. It is not proposed, then, with the
idea that there be any direction, under that definition,
to give a subsidy in connection with the cooperatives as
against the individual or the man on the outside?
“Mr. Davis. Clearly not.”
Mr. Davis testified to the same effect before the Senate
Committee on Agriculture and Forestry, at hearings on S.
1807, March 1935 (p. 44).
The House Committee reporting on the provision under
discussion made the following statement with regard there¬
to (74th Congress, 1st Session, H. R. 1241, p. 13):
“It is not intended by this language to discriminate
against other handlers, processors or dealers; but it
has been found from experience that the participation
by local committees and associations of producers has
been of material value in administering the program. ’ ’
(italics supplied).
In the Senate the sponsors of the measure assured that
body that the provision in question was designed to leave
intact the privileges and exemptions granted by law to
cooperatives. Thus an express amendment to the provision
in question forbidding discrimination against other pro¬
ducers, processors and handlers was represented to be un¬
necessary. The Senate was assured that no such discrimi¬
nation was involved, or contemplated by the law (79 Cong.
Rec. 10927).
IV.
The District Court properly applied correct principles gov¬
erning the scope of judicial review in this case.
The United States Supreme Court stated the issue in
this case to be statutory power to make the deduction for
cooperative payments, and left “the Trial Court free to
34
consider whether the statutory authority given the Secre¬
tary is a valid answer to the petitioner’s contention.”
Stark v. Wickard, 321 U.S. 288, 307, 311. The District
Court properly considered this precise issue. The Court
evinced a proper respect for the Secretary’s discretionary
powers, but correctly ruled (Joint App. 147): “The Secre¬
tary’s authority, however, is not unlimited and his discre¬
tion is not untrammelled. He must act w’ithin the confines
and the orbit of the Statute.” An agency may not finally
decide the limits of its statutory power. That is a judicial
function. Social Security Board v. Nierotko, 327 U.S. 358,
368-369. When it exceeds that power, no amount of ad¬
ministrative interpretation is binding upon the Courts.
Texas & Pacific By. Co. v. United States, 289 U.S. 627, 640;
Interstate Commerce Commission v. Cincinnati Str. Ry. Co.,
167 U.S. 479, 510.
The Secretary’s finding was a general paraphrase of
Sec. Sc(7)(D). There were no findings of ultimate facts
or subsidiary facts. Their absence does not thwart judicial
review. Whether the hearing record does or does not con¬
tain substantial evidence as to the market-wide services of
cooperatives is not the focal point for argument. The
Secretary found that the Order provisions for payments to
cooperative associations “performing certain marketing
services, were incidental to, not inconsistent with the other
provisions of the Order and necessary . . . ” . He treated
as immaterial evidence as to the alleged market-wide
services now relied on to support the challenged provisions.
The Order authorized the payments irrespective of the
performance of such services. The basic issue, therefore,
is whether the payments under the terms and conditions
of the Order are authorized by the Act, not whether pay¬
ments made on some other set of conditions or for certain
other services are permitted. The question of statutory
authority for the actual Order provisions is precisely the
type of question to which judicial review is properly di-
35
reeled and was, in fact, directed in this very case by the
mandate of the Supreme Court. Even if the “ market-
wide’ ’ services of cooperatives are germane to the issue,
the case still presents a question of statutory power. For,
assuming that the evidence in the hearing record as to
“market-wide services” was substantial, the question still
persists—does the Act authorize payments even for such
services by a deduction from producer prices?
The appellees maintain that, as a matter of law, the price
deduction for cooperative payments is not authorized by
the Act, regardless of whether the payments are treated
as related to the services specified in the Order, or are
related to the other and different services now relied on
by the appellant. Under these circumstances, it is a super¬
ficial analysis of the appellees’ position to say that because
they do not expressly attack the substantiality of the evi¬
dence before the Secretary, they are foreclosed on the
question of statutory authority (See Appellant’s Brief,
pp. 36-40). The appellees do not find it necessary to their
argument to weigh the “pros” and “cons” of the testimony
in the hearing record as to the alleged market-wide services
of cooperatives. No quantum of evidence on this subject
can transform into an “incidental” term an Order provi¬
sion which a proper construction of the Act demonstrates
is not “incidental”, or make consistent with the Act a
term which is inconsistent wdth it. Nor can an administra¬
tive official by the technique of paraphrasing the Act, a
procedure which has not commended itself to this Court
(see Saginaw Broadcasting Co. v. F.C.C ., 68 App. D.C.
282, 96 F(2d) 554, 560) avoid judicial review of the legal
conclusion, which on any possible factual hypothesis, is
inherent in his finding.
The appellees’ argument that current provisions of the
Order are different from the original provisions, and hence
the hearing record with respect to the Amendments of
August 1, 1947 is germane, confuses the basic issues. The
36
Court below found as a fact (Joint App. 152): “The pro¬
visions with respect to cooperative payments, and the
accompanying deduction from producer prices, have re¬
mained in Order No. 4 as amended from August 1, 1941
down to the present time. Slight procedural changes have
been made in them. On August 1, 1947 the rates of pay¬
ments were revised. The Secretary’s original finding has
never been amplified or amended.”* ‘Manifestly subse¬
quent administrative hearing records pertinent only to
“slight procedural changes” in the contested provisions,
and giving rise to no new finding by the Secretary, would
have no bearing on the essential issues in this litigation.
V.
The appellees have standing to sue, and the Intervenor-
Appellant's charge of champerty and maintenance is groundless.
The Supreme Court sustained the appellees’ standing
to maintain this action. Stark v. Wickard, 321 U.S. 288.
The intervenor, a New York cooperative not subject
to the Order provisions here in issue, seeks to inject
into the case a last minute attack upon their in¬
terest and good faith. The appellant voluntarily withdrew
a motion to dismiss predicated on similar charges (Joint
App. 466, 467). The intervenor is limited to the field of
litigation between the parties. See Chandler & Price
The intervenor refers to a “second finding” in 1944 by the
Acting Director of Food Distribution (Intervenor-Appellant’s
Brief, p. 23). The Appellant’s amended answer describes the same
document as an “official conclusion”. It was a “Notice of Re¬
port” by the Acting Director of Food Distribution filed on March
18, 1944* (9 F.R. 3057-3060). The conclusions therein were never
incorporated into any official finding in the Order or any amend¬
ment thereto, and hence were never made and “set forth” as the
Act requires [Sec. 8c(4) and (17)]. The report purports to be
a statement by one official of considerations underlying action taken
by a different official—three years earlier. It does reveal an un¬
fortunate confusion in the administrative mind as to the statutory
basis for the contested provisions.
37
Co. v. Brandtzen & Klug, Inc., 296 U.S. 53, 58; Salem Engi¬
neering Co. v. National Supply Co., 75 F. Supp. 993;
Reynolds Pen Co. v. Marshall Field do Co., 8 F.R.D. 314;
Mueller v. Adler, 292 Fed. 138; Adler v. Seaman, 266 Fed.
828, 842-843. The appellees properly objected in the District
Court (Joint App. 467) to the intervenor’s belated attempt
to question “the propriety of the main proceeding” or chal¬
lenge the status of the plaintiffs.
In any event, the charge of champerty, maintenance and
kindred aspersions by the intervenor are groundless. The
findings of fact by the District Court are to the effect that
each plaintiff is individually affected in a pecuniary way by
the application of the cooperative deduction to his deliveries
of milk as a “producer” under the Order (Joint App. 153,
p. 2 supra). To a large cooperative like the intervenor,
drawing the accumulated deductions of hundreds of pro¬
ducers from the fund, the financial interests of the appellees
may seem “meagre” (Intervenor-Appellant’s Brief, p. 18);
but the individual farmer, “practically all of whose time
must be devoted to production” (Appellant’s Brief, p. 21),
cannot be equally careless or callous about his personal
financial loss.
JThe District Court found that the plaintiffs “instituted
this action” (Joint App. 153). Prior thereto they, and
similarly situated farmers, had opposed the deduction at
administration hearings (Joint App. 255, 332, 356). The
producer referendum on the proposed deduction “gave
producers an opportunity to vote only for or against the
issuance of the entire Order as amended, and not on the
newly proposed provisions for cooperative payments, sepa¬
rately and apart from the other provisions of the Order”
(Findings of Fact, Joint App. 152). Hence the results of the
referendum are no reflection of the widespread extent of the
opposition to the challenged provisions among independent
farmers in the milk shed (Joint App. 278, 332, 334). A group
of such producers, meeting in the summer of 1941, and
38
including the appellees Stark and Denton, determined to
take legal action (Joint App. 331-4). Before proceeding,
they decided to ascertain whether producers in the area
would support them. A large meeting was thereafter held
in Colebrook, X. H., attended by producers from distant
parts of the milk shed. Sentiment was strongly in favor of
court action (Joint App. 334, 337). Hundreds of producers
authorized deductions from their milk checks to defrav the
•/
expenses of suit, creating a fund available for that purpose
(Joint App. 308, 309, 360, 361). The plaintiffs Stark,
Denton and Stratton employed counsel and authorized him
to commence suit in their names because the joinder of
some 1400 or 1500 producers would be cumbersone (Joint
App. 339). Stark wrote to the appellee Stebbins, a Hood
producer and representative farmer, who was glad to join in
and contribute to the action (Joint App. 278, 279, 344).
Stark went to the New York area, where he knew there was
organized producer opposition to the amendment, and
learned that the appellee Walsh was President of the inde¬
pendent producers association (Joint App. 340). Walsh
subsequently agreed to join in the action to express his own
and his organization’s views (Joint App. 260-1). No
handler instigated or incited the appellees to commence this
action (Joint App. 275, 278, 326-327, 349, 366).
According to the appellant “it is impossible for the aver¬
age dairy farmer of small means to obtain the advantages
obtainable by large organizations” (Appellant’s Brief, p.
21-22). The intervenor paints the plight of the independent
producer in even darker colors. “Unorganized producers
are wholly unable to present to the Secretary any rational
marketing programs. They have neither cohesion, knowl¬
edge of marketing problems, experience in marketing or
legal and technical experts. On the other hand, the coop¬
eratives have all of these.” (Intervenor-Appellant’s Brief,
p. 32). Manifestly when cooperatives are advocating price
deductions from non-member producers, there is a diversity
39
of interest between the two groups. In such a situation, the
independent producer without assistance is doomed to an
uneven struggle against superior resources if the appel¬
lants’ statements as to his condition are accurate. The
language of the Court, in Jahn v. Champagne Lumber Co.,
157 Fed. 407, 418, is thus particularly applicable:
“It has never been held violative of law or public policy
to give financial aid to a poor suitor who is prosecuting a
meritorious cause of action. In the absence of any bargain
to share the recovery, no just criticism can attach to one
offering such friendly aid . . . The law does not tolerate
the notion that a powerful defendant may force the aban¬
donment of a suit whenever he is able to exhaust the slender
means of a weak antagonist.”
Contributions to the expenses of this litigation by
handlers do not close the portals of the courts to the
appellees. As the District Court said: “ It would be equally
unsound to bar a person from recourse to a judicial remedy
merely because the expenses incurred by him in the litiga¬
tion are advanced, or borne by someone else. For example,
were this the rule, many a matter involving civil rights
could not have been brought before the courts in cases in
which some organization is championing the rights of a
poor person.” (Joint App. 145). A handler may come to
the assistance of a producer who has been shipping milk to
it for over a quarter of a century (Joint App. 145), and
who is seeking to protect his milk check from an illegal
invasion by powerful and resourceful associations with
their “legal and technical experts.” Such aid is not
champerty or maintenance. The Hood Company was also
a large producer of milk and subject to the contested deduc¬
tion (Joint App. 457-460). A person may contribute with
entire propriety to the expense of litigation which affects
his own legal position (6 Williston, Contracts (Rev. Ed.
1937) § 1714).
40
The history of the case shows that appellees were vindi¬
cating: the rights of hundreds of similarly situated non¬
member producers, as well as their own individual rights.
Hence the action could properly be characterized as a class
suit. In any event, they had the right to bring this action
in their individual capacities. The District Court properly
entertained it as such, particularly in the light of the state¬
ment by the United States Supreme Court (321 U.S. 288,
305): “We deem it clear that on the allegations of the
complaint these producers have such a personal claim as
justifies judicial consideration. ”
CONCLUSION.
For the foregoing reasons the Judgment of the District
Court should be affirmed.
Respectfully submitted,
Edward B. Hanify
Harry Polikoff
Attorneys for Appellees ,
Delbert O. Stark et al.
Edgar J. Goodrich
Lipman Redman
Ring Building
Washington, D. C.
Of Counsel.
United States Court of Appeals for the
District of Columbia.
October Term, 1949.
Nos. 10,365 and 10,366.
CHARLES F. BRANNAN, Secretary of Agriculture,
Appellant,
AND
DAIRYMEN’S LEAGUE COOPERATIVE
ASSOCIATION, INC., Intervenor Appellant,
v.
DELBERT 0. STARK et al., Appellees.
On Appeal from an Order from the United States Dis¬
trict Court for the District of Columbia.
BRIEF OF NEW ENGLAND MILK PRODUCERS’
ASSOCIATION, UNITED FARMERS OF NEW
ENGLAND, INC., ET AL., AMICI CURIAE.
REUBEN HALL,
WALDO NOYES,
Boston, Massachusetts,
GEORGE H. THOMPSON,
Bellows Falls, Vermont,
Attorneys for Amici Curiae.
Marion R. Garstang,
Harry Scharnikow,
1731 Eye Street,
Washington, D.C.,
Of Counsel.
. W */ . i ^ / W V I If '
ADDISON C. GETCHELL A SON, XAF J^JNTBB*. .30ST0K. J
Subject Index.
Page
Foreword 1
Statement of interest 2
Statutes and orders involved 2
Statement of the case 3
Statement of points 3
Argument 4
Point I 4
Point II 7
Conclusion 15
Table of Authorities Cited.
Cases.
Ada County v. Oregon Short Line R. Co., 97 F. (2d)
666 5
American Power & Light Co. v. Securities & Ex¬
change Commission, 329 U.S. 90 5
Builders Club of Chicago v. United States, 58 F.
(2d) 503 5
Dobson v. Co mmi ssioner of Internal Revenue, 320
U.S. 489 6
Gemsco, Inc. v. Walling, 324 U.S. 244 5,6
National Labor Relations Board v. Hearst Publica¬
tions, Inc., 322 U.S. Ill 6
Porter v. Murray, 156 F. (2d) 781 15
Robin Goodfellow, The, 20 F. (2d) 924 - 5
Sioux Tribe of Indians v. United States, 316 U.S. 317 15
United States v. Rock Royal Co-operative, Inc., 307
U.S. 533 5,7
11
AUTHORITIES CITED
Page
United States v. Rock Royal Co-operative, Inc., 26
F. Sup. 534 7
Yakus v. United States, 321 U.S. 414 5
Statutes.
Agricultural Marketing Agreement Act of 1937 (Act
of June 3, 1937, c. 296, 50 Stat. 246, 7 U.S.C. 601
et seq.) 2
Section 8c (3) 6
Section 8c (4) 6
Section 8c (5) (6) (7) 3,4
Section 8c (5) (B) 6
Section 8c (5) (C) 8
Section 8c (7) (D) 3,4,6,7,15
Boston Milk Marketing Order as amended (6 F.R.
3762, 5481, 7 C.F.R. 1941 Sup. 904.0 et seq.; and
12 F.R. 4921, 7 C.F.R. 1947 Sup. 904.0 et seq.) 2, 5
Senate Report No. 1719, Seventy-sixth Cong., Third
Sess. 13
S. 3426, U.S. Senate, Seventy-sixth Cong., Third
Sess. 8,9,11,12,13,15
Order No. 27, issued Aug. 1938 7
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA.
October Term, 1949.
Nos. 10,365 and 10,366.
CHARLES F. BRANNAN, Secretary of Agriculture,
Appellant,
and
DAIRYMEN’S LEAGUE COOPERATIVE
ASSOCIATION, INC., Intervenor Appellant,
v.
DELBERT 0. STARK et al., Appellees.
On Appeal from an Order from the United States Dis¬
trict Court for the District of Columbia.
BRIEF OF NEW ENGLAND MILK PRODUCERS’
ASSOCIATION, UNITED FARMERS OF NEW ENG¬
LAND, INC., ET AL., AMICI CURIAE.
Foreword.
New England Milk Producers’ Association; United
Fanners of New England, Inc.; Bellows Falls Cooperative
Creamery, Inc.; Bethel Cooperative Creamery; Connecti¬
cut Valley Dairy, Inc.; Grand Isle Cooperative Creamery;
2
Granite City Cooperative Creamery, Inc.; Milton Coopera¬
tive Dairy Cooperation; Mt. Mansfield Cooperative Cream¬
ery & Grain Association, Inc.; Richmond Cooperative
Creamery; Shelburne Cooperative Creamery Company;
Tunbridge Cooperative Creamery, Inc.; by their counsel
respectfully submit herewith their Brief as Amici Curiae
in the within cause, all parties having previously assented.
Statement of Interest.
The several cooperative corporations whose names are
set forth in the next preceding paragraph are all coopera¬
tive associations of producers of milk organized and ex¬
isting under the laws of Massachusetts, Vermont and New
Hampshire, engaged in the marketing of milk in the
Greater Boston marketing area. They are cooperative
associations of producers determined by the Secretary of
Agriculture as qualified to receive certain payments under
the provisions of Section 904.9 of Order No. 4 as amended
regulating the handling of milk in the Greater Boston,
Massachusetts, milk marketing area, which section of said
Order was challenged as illegal by the appellees in their
complaint filed in the Court below.
Statutes and Orders Involved.
The relevant parts of the Agricultural Marketing Agree¬
ment Act of 1937 (Act of June 3, 1937, c. 296, 50 Stat. 246,
7 U.S.C. 601 et seq.) and the Boston Milk Marketing Order
as amended (6 F.R. 3762, 5481, 7 C.F.R. 1941 Sup. 904.0
et seq.; and 12 F.R. 4921, 7 C.F.R. 1947 Sup. 904.0 et seq.).
The foregoing sections of the Agricultural Marketing
Agreement Act of 1937 and of the Marketing Order are set
forth in the appendix to the Brief as filed on behalf of
Charles F. Brannan, Secretary of Agriculture, and in the
3
Brief filed on behalf of the Dairymen’s League Coopera¬
tive Association, Inc., Intervenor Appellant, pages 2 to
5, inclusive.
Statement of the Case.
The statement of the case contained in the Appellant’s
Brief is hereby adopted.
The interpretation of the relevant sections of the Agri¬
cultural Marketing Agreement Act and of the Order issued
by the Secretary of Agriculture as discussed and presented
in the Briefs of the Appellant and Intervenor Appellant
are hereby adopted.
The interpretation claimed here is not contrary thereto,
but in support of and supplemental to it.
Statement of Points.
I.
The determination of the Secretary that the deductions,
that is, the sums paid to cooperatives for market-wide ser¬
vices, were incidental to and not inconsistent with the
terms and conditions specified in Section 608c (5) (6) (7)
of the Act and were necessary to effectuate the other pro¬
visions of his Order was an administrative determination
by the Secretary of his powers and a construction of the
Act entitled to great weight.
H.
Section 608c (7) (D) of the Agricultural Marketing
Agreement Act of 1937 as amended (7 U.S.C. 601 et seq.)
confers on the Secretary of Agriculture authority and
power to include within the terms of the Boston Milk Mar¬
keting Order as amended provisions for payments to co¬
operative associations of producers for market-wide ser-
4
vices. The District Court erred, therefore, in adjudging
that these provisions of the amended Order are not au¬
thorized by the Act and the District Court was in error in
enjoining the Secretary from making the payments to the
cooperative associations of the producers as provided in
the amended Order.
Argument.
Point I.
The determination of the Secretary that the deductions,
that is, the sums paid to cooperatives for market-wide ser¬
vices, were incidental to and not inconsistent with the
terms and conditions specified in Section 608c (5) (6) (7)
of the Act and were necessary to effectuate the other pro¬
visions of his Order was an administrative determination
by the Secretary of his powers and a construction of the
Act entitled to great weight.
The Act is the Agricultural Marketing Agreement Act
of 1937 (7 U.S.C. 601 et seq.). Section 8c (5) provides
that, with respect to milk and its products, orders issued
thereunder shall contain one or more of the terms and con¬
ditions therein specified and (except as provided in sub¬
section (7)) no others.
Section 8c (7) provides for the inclusion in all orders of
one or more of the terms and conditions therein specified.
Paragraph (D) is as follows:
“(D) Incidental to, and not inconsistent with, the
terms and conditions specified in subsections (5)-(7)
and necessary to effectuate the other provisions of
such order.”
Considerable flexibility is provided by Section 8c (7)
(D) as to the terms and conditions which may be included
5
in milk orders. 1 Suck terms and conditions must, how¬
ever, be auxiliary to those definitely specified and must be
within the limitations of being incidental to, not incon¬
sistent with, other provisions and necessary to effectuate
the other.
“Incidental” has been defined as something additional,
accessory or collateral to something else as primary. 2
The word “necessary” does not mean and should not be
construed to mean “indispensable, inevitable, essential or
vital,” nor merely “convenient or profitable,” but some¬
where in between. 3
The incidental and necessary provision of the Act must
be viewed as part of the whole texture of the Act and of
the policy which the Act is designed to effectuate. It has
been held that, where Congress has entrusted to an ad¬
ministrative agency the responsibility of selecting the
means of achieving the statutory policy, the relation of
remedy to policy is a matter for administrative compe¬
tence and its judgment is entitled to the greatest weight. 4
An examination of the challenged provisions demon¬
strates that these provisions are not inconsistent with the
other provisions of the Order which relate to classified
price and equalization and the mechanics of effectuating
them.
The performance of the services by the cooperatives
outlined in Section 904.10 of the Order results in substan¬
tial benefits to producers as a whole and causes consider¬
able expense to the cooperatives. Since such expense
'United States v. Rock Royal Co-operative, Inc., 307 U.S. 533,
575.
2 Builders Club of Chicago v. United States, 58 F. (2d) 503, 505.
The Robin Goodfellow, 20 F. (2d) 924.
3 Ada County v. Oregon Short Line R. Co., 97 F. (2d) 666, 671.
4 American Power & Light Co. v. Securities & Exchange Com¬
mission, 329 U.S. 90. Gemsco, Inc. v. Walling, 324 U.S. 244.
Ydkus v. United States, 321 U.S. 414.
6
must be reflected in the return to its producers, it would be
difficult, if not impossible, for a cooperative to continue to
perform these services without compensation. Since these
services are necessary to secure the efficient operation of
the Order, it follows that the payments to cooperatives are
not only necessary “equitably to apportion” (Section 8c
(5) (B) of the Act) the total value of milk among all pro¬
ducers, but are also necessary to effectuate the other pro¬
visions of such order.
It was the duty of the Secretary under Sections 8c (3),
8c (4) and 8c (7) (D) to insert in the Order provisions to
effectuate the policy of the Act. In order to fulfill this
obligation, the Secretary must have power to use every
reasonable means in his judgment necessary to effectuate
the desired end. The determination of the Secretary based
on substantial evidence at the hearings before him as to
what provisions of an order are incidental and necessary
to effectuate the other provisions of the Order and the broad
policies of the Act must be conclusive unless clearly for¬
bidden by the terms of the Act itself or clearly abuse of dis¬
cretion. 5
Questions of statutory interpretation, especially arising
in the first instance in judicial proceedings, are for the
courts to resolve, giving appropriate weight to the judg¬
ment of those whose special duty is to administer the ques¬
tioned statute; but where the question is one of specific
application of a broad statutory term in a proceeding in
which the agency administering the statute must determine
it initially, the reviewing court’s function is limited, and
the administrative interpretation is to be accepted if it has
warrant in the record and a reasonable basis in law. 6
5 Gemsco, Inc., v. Walling, 324 U.S. 244.
6 National Labor Relations Board v. Hearst Publications, Inc.,
322 U.S. 111. Dobson v. Commissioner of Internal Revenue, 320
U.S. 489.
7
Point IL
Section 608c (7) (D) of the Agricultural Marketing
Agreement Act of 1937 as amended (7 U.S.C. 601 et seq.)
confers on the Secretary of Agriculture authority and
power to include within the terms of the Boston Milk Mar¬
keting Order as amended provisions for payments to co¬
operative associations of producers for market-wide ser¬
vices. The District Court erred, therefore, in adjudging
that these provisions of the amended Order are not au¬
thorized by the Act and the District Court was in error in
enjoining the Secretary from making the payments to the
cooperative associations of the producers as provided in
the amended Order.
Within a few months after the enactment of the Agri¬
cultural Marketing Agreement Act of 1937 the Secretary
of Agriculture issued an Order regulating the marketing
of milk in the New York Market. 7 Included in this Order
was a provision for payments to cooperative associations
similar in their nature to the payments challenged by this
litigation.
Prior to the Order being made effective, wide publicity
was given to the proposed Order and to this particular
provision.
The Order was challenged in the District Court and the
District Court ruled with respect to the provision relat¬
ing to the cooperative payments that the Secretary was
without statutory authority to include such a provision
within the New York Order. 8
Upon review the Supreme Court held that handlers had
no standing to challenge the propriety of this particular
provision of the New York Order.® Following the decision
7 Order No. 27, issued August, 1938.
8 United States v. Rock Royal Co-operative, Inc., 26 F. Sup. 534,
553.
®United States v. Rock Royal Co-operative, Inc., 307 U.S. 533.
8
of the Supreme Court the Secretary reissued the Order,
retaining within it the provision for payments to coopera¬
tives.
In 1940 Senator Gillette introduced in the Senate a bill
to amend the Agricultural Adjustment Act as it had been
amended by the Agricultural Marketing Agreement Act of
1937. This Bill was known as S. 3426. Section 4 of that
Bill provided that Section 8c (5) (C) be amended by add¬
ing the following paragraph:
“ ‘Providing further (i) reasonable compensation
(to be paid out of any pool or fund) established under
this paragraph (C) of subsection (5), as determined
by the Secretary, to bona fide cooperative marketing
associations, all of whose operations are under the full
control of milk producers, for services rendered to
producers of milk or its products covered by the order
by performing such marketing functions specified
therein as the Secretary determines will tend to effec¬
tuate the declared policy of this Act, including but not
by way of limitation, handling of surplus milk, or mak¬
ing available to the market a sufficient supply of milk
at all times: Provided, however, That no such compen¬
sation shall be paid to any cooperative association
which does not comply with the applicable provisions
of the order: * # V’
The Bill was referred by the Senate Committee on Agri¬
culture to the Department of Agriculture for comment.
In the letter from the Secretary of Agriculture to the
Committee on Agriculture dated March 30, 1940, the Sec¬
retary made the following comment:
“Section 4 amends Section 8c (5) (C) by providing
specific authority for the making of certain payments
out of any pool or funds, where the market-wide pool
9
plan of settlement is used, to cooperatives and to oper¬
ators of plants for certain services performed. Such,
payments are frequently necessary to insure adequate
supplies of milk at all times within the market and to
make proper arrangements for the handling of the
surplus. Owing to the different services performed by
the various factors in the milk market, the making of
such payments will permit more equitable operation
of milk orders. ’ ’ 10
Accompanying the Secretary’s letter was a comparison
of the Agricultural Marketing Agreement Act of 1937 be¬
fore and after amendment as proposed by S. 3426, with
explanatory remarks.
With respect to Section 4, above quoted, the comment
made was as follows:
1 ‘The third proposed amendment to Section 8c (5)
of the Act, being Section 4 of S 3426, adds new lan¬
guage to the present law which makes clear and defi¬
nite the authority to provide in a marketing order
regulating milk and its products for the payment of
cooperative and market service differentials.
“The proposed amendment, while embraced in a
single paragraph, expresses two independent author¬
izations—one designated (I) and the other designated
(II).
“That part designated (I) refers to payments to
cooperatives for rendering services to the market.
Such payments are authorized in the present law by
virtue both of Section 8c (5) (B) and Section 8c (7),
• • * and Section 8c (7) providing 1 In the case of
agricultural commodities and the products thereof
10 Record of Hearings before the Subcommittee of the Committee
on Agriculture and Forestry, United States Senate, Seventy-sixth
Congress, Third Session, on S. 3426.
10
specified in subsection (2) orders shall contain one or
more of the following terms and conditions: * * *.
“ ‘(D) Incidental to, and not inconsistent with, the
terms and conditions in subsections (5), (6) and (7)
and necessary to effectuate the other provisions of
such order’.
“The reason assigned by the Secretary in support
of the proposed amendment is stated as follows:
“Reason.—In order to make definite and certain
the Secretary’s authority in this regard and to settle
the question that insufficient standards are spelled out
in the act to guide the Secretary, it is regarded as es¬
sential that the law be amended in the respects con¬
templated by section 4 of S. 3426.
“The market services for which these payments
may be made to a qualifying cooperative are clearly
set forth in the brief of the United States Government
in the case of United States v. Rock Royal Co-opera¬
tive, Inc., et al. (307 U.S. 533, 59 S. Ct. 993, pp. 158
et seq.), which may be paraphrased as follows:
“(1) Service performed in the supplying class I
milk to the marketing area in times of short supply;
“ (2) Service performed in the utilization of milk in
times of long supply in such manner as to insure the
greatest possible return to producers;
“(3) Service performed by the maintenance
throughout the year of facilities for handling the sea¬
sonable surplus even though these facilities can be
employed only during the flush season;
“ (4) Service performed for the market by the em¬
ployment of measures during flush periods of produc¬
tion to secure the utilization in fluid form of milk near
to the market, and the utilization in manufactured
form of milk produced at the edge of the milkshed,
thus reducing transportation charges which must be
shared by all producers;
11
“(5) Miscellaneous services performed for the ben¬
efit of the entire market with respect to weights, tests,
market outlets, etc.
“The amendment proposed in section 4 of S. 3426,
namely, part (I) thereof, will make it clear and cer¬
tain that the Secretary of Agriculture in his discre- «
tion has full power to fix differentials in favor of co¬
operative associations which are rendering these or
similar services and which services tend to effectuate
the public policy of the Marketing Agreement Act. By
the amendment the Secretary will have authority to
fit such payments appropriately to the value of the
service rendered.
“It is to be noted that as a prerequisite to receiving
any such payment, the cooperative must be bona fide
and under the exclusive control of its member-pro¬
ducers. Furthermore, it must be in full compliance
with all provisions of the marketing order which gov¬
ern it.” 11
At the hearing held before a sub-committee on the Com¬
mittee on Agriculture of the Senate, Dr. E. W. Gaumnitz,
Director, Division of Marketing and Marketing Agree¬
ments, Agricultural Adjustment Administration, Depart¬
ment of Agriculture, made this statement with respect to
Section 4 of S. 3426:
“Section 4 * * *, amending Section 8c (5) (C), rec¬
ognizes and now provides specifically that the power
to fix minimum prices to handlers and the manner of
making payments to producers can include in the total
segregation from the total value of milk, as fixed by
an order, a sum to provide a reasonable compensation
11 Record of Hearings before the Subcommittee of the Commit¬
tee on Agriculture and Forestry, United States Senate, Seventy-
sixth Congress, Third Session, on S. 3426, p. 26.
12
to bona fide producer-owned and producer-controlled
associations for services which they may render to the
entire market, and from which all producers derive
benefits.” 12
In response to a question from Senator Schwellenbach,
Mr. Gaumnitz stated as follows:
“Again it is primarily a matter of attempting to
avoid controversy and litigation. Provisions similar
to that carried in this section have been included in
certain of the milk orders, specifically that for New
York, which was before the Supreme Court, and on
which the Supreme Court ruled favorably. However,
it is one of those provisions that are controversial in
character, and it was thought that the inclusion of a
specific authority might eliminate, in whole or in part,
additional litigation with respect to the enforcement
of marketing agreements and orders.” 13
In answer to a further question from Senator Schwellen¬
bach to whether the amount allowed as reasonable was con¬
troversial or the principle was questioned, Mr. Gaumnitz
stated:
“The first question is as to principle, and it would
appear that the court has pretty well passed on the
principle, although it is still a controversial point.
The question of reasonableness has not come up di¬
rectly. 7 7 13
12 Record of Hearings before the Subcommittee of the Committee
on Agriculture and Forestry, United States Senate, Seventy-sixth
Congress, Third Session, on S. 3426, pp. 52-53.
13 Record of Hearings before the Subcommittee of the Committee
on Agriculture and Forestry, United States Senate, Seventy-sixth
Congress, Third Session, on S. 3426, pp. 52-53.
13
No opposition appeared before the Senate Committee on
Agriculture with respect to those provisions of S. 3426 in¬
cluding Section 4 thereof having to do with milk orders.
The bill was favorably reported by the Committee on
Agriculture to the Senate. 14
In the report discussing Section 4 the Committee said:
“Section 4 of the amending bill amends section 8c
(5) (C) of the act by providing specifically for the
segregation, from the total value of milk as fixed by
the order, of sums to provide reasonable compensation
for two distinct kinds of marketing services as indi¬
cated in the provisions designated as (I) and (II).
This authority is considered as being involved in the
power to fix minimum prices to handlers and the man¬
ner of making payments to producers already con¬
tained in the act. Hence, the purpose of section 4 is
to establish more explicit standards by which the Sec¬
retary shall be guided in providing for such compen¬
sation. Both types of services are definitely associ¬
ated with the proper functioning of an order program
and the effectuation of the policy of the act.
“The services for which compensation is author¬
ized by the provision designated by (I) are of the type
regarded as essential in carrying out the method of
payment to producers authorized by paragraphs (B)
(II) and (C) of subsection (5) of section 8c under the
method of pricing milk to handlers provided in para¬
graph (A) of the same sub-section. Authorization of
such compensation to be paid out of any pool or fund
established under paragraph (C) of subsection (5) in¬
volves the fundamental principle that such services
be those which are identifiable as benefiting all pro¬
ducers with a reasonable degree of equality as distin-
14 Senate Report No. 1719, Seventy-sixth Congress, Third Ses¬
sion, pp. 7 and 8.
14
guished from services, the benefits of which are lim¬
ited primarily to members of a particular cooperative
association. Illustrations of these types of market¬
ing services are suggested in the amendment itself,
but the Secretary is authorized to specify others which
may conform to these general principles when neces¬
sary to achieve the same marketing results under cir¬
cumstances peculiar to different markets. Because
of the nature of such services, compensation with re¬
spect thereto is limited to bona fide cooperative mar¬
keting associations, all of whose operations are under
the full control of milk producers.
“The services for which compensation is author¬
ized by the provision designated by (II) are in addi¬
tion to and in no way a duplication of the services for
which compensation is authorized under (I). The
payments authorized by (II) are similar to location
differentials now authorized, having to do with the
movement and handling of milk, and are available to
any plant operator, irrespective of whether or not
such operator is also a cooperative association. This
type of allowance is designed to cover costs involved
in the movement of milk from or to processing plants
when marketing conditions are such as to necessitate
such movement in order to maximize returns to all
producers.
“Eligibility of an association or operator to receive
payments authorized by (I) and (II) from a pool or
fund as established by an order is further conditioned
upon compliance with the applicable provisions of the
order. These two provisions supplement each other
and together provide a way whereby all producers who
enjoy the benefits of such marketing services also
carry a reasonable and proportionate share of the
burden involved.”
15
S. 3426 was passed by the Senate, bnt no action was
taken by the Honse.
The foregoing legislative history establishes clearly that
in construing Section 8c (7) (D) the Court must rule that
the Agricultural Marketing Agreement Act of 1937 author¬
ized and empowered the Secretary to include within the
terms of the Boston Federal Milk Order the provision for
the cooperative deductions here being contested.
Sioux Tribe of Indians v. United States, 316
U.S. 317, 329;
Porter v. Murray, (C.A. 1) 156 F. (2d) 781, 785.
Conclusion.
The judgment of the lower court sustaining the amended
bill of complaint should be reversed and the amended com¬
plaint should be dismissed.
Respectfully submitted,
REUBEN HALL,
WALDO NOYES,
Boston, Massachusetts,
GEORGE H. THOMPSON,
Bellows Falls, Vermont,
Attorneys for Amici Curiae.
Mart otst R. Garstang,
Harry Scharxikow,
1731 Eye Street,
Washington, D.C.,
Of Counsel.
REPLY BRIEF FOR THE SECRETARY OF AGRICUL¬
TURE, APPELLANT
®mteb States Court of
FOB THE DISTRICT OF COLUMBIA CIRCUIT
October Term, 1^49
Nos. 10,365 «hwHK£906 , ‘'
Charles F. Brannan, Secretary of Agriculture,
APPELLANT
». I
Delbert 0. Stark, et al., appellees
Dairymen’s League Co-operative Association, Inc.,
APPELLANT
v. • I
Delbert 0. Stark, et al., appellees
ON APPEAL FROM A JUDGMENT OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
Gi fppzzls.
- * y f s
- ^ '
J. STEPHEN DOYLE. JR..
NEIL BROOKS.
Special Assistants to the Attorney General .
LEWIS A. SIGLER.
Assistant Associate Solicitor.
MARY CONNOR MYERS.
Attorney,
U. S. Department of Agriculture.
|
i
INDEX
Page
Restatement of the Issues. 1
Summary of Argument . 2
Argument . 6
I. The uniform prices under $ Sc(5) of the Act relate to
payments for milk. The payments to co-operatives
are for services performed, and not for milk sold or
delivered by producers. The co-operative payments, for
services performed under the order, are permissible sub¬
tractions in the computation of the uniform blended price,
and are not variations or adjustments to the uniform
prices under the Act. 6
II. The payments to co-operatives for market-wide services
are not antithetical or repugnant to the terms and condi¬
tions in section 8c (5) of the Act. There is, therefore,
no basis for the appellees’ contentions that the payments
to cooperatives are “inconsistent” under section
8c(7) (D) of the Act with the terms or conditions in
section 8c (5) of the statute. 20
III. Assuming, arguendo, that the payments to cooperatives
are “adjustments” to the uniform prices in addition to
the adjustments expressly, set forth in $Sc(5)(A) and
(B), such additional adjustments for co-operative pay¬
ments are permissible under $ 8c(7) (D) of the Act. 22
IV. The Boston milk order is explicit in requiring the per¬
formance of market-wide services by the co-operatives
that receive the payments, and the appellees’ criticism
of the order in this respect fails to refer to other signifi¬
cant provisions in the order. 26
V. The scope of judicial review is limited, and the validity of
the provisions for payments to cooperatives depends
on whether substantial evidence in the hearing record
supports the Secretary’s findings. The hearing record
on which the present order provisions are based is not
before this Court and, therefore, since the provisions for
cooperative payments are not prohibited by the Act,
there can be no holding that the provisions are invalid.. 29
Conclusion . 31
Appendix:
Relevant sections of the Agricultural Marketing Agreement
Act of 1937 . 32
Relevant findings with respect to the Boston milk marketing
order . 36
Relevant sections o£ the Boston milk marketing order. 37
(I)
n
^ CITATIONS
Cases: Page
Bailey Farm Dairy Co. v. Anderson (C.A. S), 157 F. 2d 87,
cert, denied, 329 U. S. 78S.4, 6, 7,17
Belknap v. Shock, 125 W. Va. 385, 24 S. E. 2d 457. 20
Bodkin v. State, 132 Neb. 535, 272 N. W. 547. 20
Bond v. Phelps, 200 Okla. 70, 191 P. 2d 938. 20
Brotrn v. Duchesne, 19 How. 1S3. 22
Cardillo v. Liberty Mutual Insurance Co., 330 U. S. 469. 31
City of Mobile v. Collins, 24 Ala. App. 41, 130 So. 369 . 20
Colgate Company v. United States, 320 U. S. 422. 31
Commonwealth v. Staunton Mutual Telephone Co., 134 Va.
291, 114 S. E. 600 . 20
Costanzo v. Tillinghast, 287 U. S. 341. 19, 22, 25
Dairymen's League Co-operative Association, Inc. v. Brannan
(C.A. 2), 173 F. 2d 57. 10
Ex parte Public Bank, 278 U. S. 101 . 25
Ginsberg <£' Sons v. Popkin, 285 U. S. 204. 25
Grandview Dairy v. Jones (C.A. 2), 157 F. 2d 5, cert, denied,
329 U. S. 787. 3,6,13,14
Green Valley Creamery v. United States (C.A. 1), 10S F. 2d
342 . 3, 4, 6,10,15,16
Helvering v. New York Trust Company, 292 U. S. 455 . 22
Helvering v. Stockholms Enskilda Bank, 293 U. S. S4 . 22
In re Robertson (D.C. N.D. Tex.), 20 F. Supp. 270 . 20
Ketchum v. United States (C.A. 8), 270 Fed. 416 . 20
Lehigh Valley Coal Company v. Yensavage, 218 Fed. 547. 18
Lichter v. United States, 334 U. S. 742. 18
Louisville Water Co. v. Clark, 143 U. S. 1. 20
McCaughn v. Hershey Chocolate Company, 2S3 U. S. 4SS. 19
Murphy Oil Co. v. Burnett, 287 U. S. 299. 19
National Labor Relations Board v. Hearst Publications, Inc.,
322 U. S. Ill. 31
National Lead Company v. United States, 252 U. S. 140. 19
Nebbia v. New York, 291 U. S. 502. 18
Philadelphia Company v. Securities and Exchange Commission,
— App. D. C. —, 177 F. 2d 720. 31
Queensboro Farm Products, Inc. v. Wickard (C.A. 2), 137 F.
2d 969 . 4, 6,10,19, 30
Roland Electrical Co. v. Walling, 326 U. S. 657 . 31
Secretary of Agriculture v. Central Roig Refining Company,
33S U. S. —, 70 S. Ct. 403, 94 L. Ed. 297 . 25
Shields v. Utah Idaho Central R. Co., 305 U. S. 177. 6, 31
Stark v. Wickard, 321 U. S. 288 . 7, 8,18
State v. Dairy Distributors, 217 Wis. 167, 258 N. W. 3S6. 26
State ex rel. Kipker v. City of Lima, — Ohio App. —, 32 N.E.
2d 48S . 20
Thompson v. Consolidated Gas Utilities Corporation, 300 U. S.
55 . 30
Unemployment Compensation Commission v. Oregon, 329 U. S.
143, 153-154 .. 31
rn
Cases—Continued
Page
United States v. American Trucking Association, 310 U. S.
534 . 31
United States v. Jackson, 280 U.S. 183. 31
United States v. Rock Royal Co-operative, Inc., 307 U. S.
533 . 4,5, 6, 8,11,15,18,24,25,30
Waddington Milk Co. v. Wickard (C.A. 2), 140 F. 2d 97.4, 6,17
Wallace v. Hudson-Duncan <k Company (C.A. 9), 98 F. 2d
985 . 30
White v. United States, 305 U. S. 281. 22, 25
Statutes and Orders:
Act of July 3, 1948, c. 827, 62 Stat. 1258, 7 U.S.C. Supp. II,
672 . 19
Section 302(e) . 19
Agricultural Marketing Agreement Act of 1937, c. 296, 50 Stat.
246, 7 U.S.C. 601 et seq.2,16,17, 30
Section 8c(5) . 2,4,5, 6,10,11,16,17,18, 20, 21,22, 23
Section 8c(5) (A) .2, 3,4,5, 6, 7,11,12,17,21,22,23, 24,25
Section 8c(5) (B) .2, 3,4,5, 6,7, 9,12,17,19, 21,22, 23
Section 8c(5) (B) (i) . 15
Section 8c(5) (C) . 8
Section 8c(7) .5,23,25
Section 8c(7)(B) . 23
Section 8c (7) (D) . 2,4,5,10,16,19, 20,21,22,24,25
Section 8c (18) . 10
Section 10(b) . 24
Boston Milk Order . 2,5, 8, 9,11,15,21,26, 28,29
Section 904.8 . 8
Section 904.8(b) . 2
Section 904.8(b)(4) . 21
Section 904.8(b)(7) . 8,11
Section 904.9 . 11
Section 904.9(d) . 8,21
Section 904.9(e) . 8,21
Section 904.10 . 27
Section 904.10(a) . 27
Section 904.10(b) . 27
Louisville Milk Order . 14
Lowell-Lawrence Milk Order. 15
Section 934.9(b)(2) . 15
New York Milk Order.3,12,14
Section 927.7(b)(2) . 13
Section 927.7(f) . 13
11 F.R. 640 . 29
Miscellaneous:
Docket No. AO-14-A12, in office of Hearing Clerk, U. S. Dept.
of Agriculture, Washington, D. C. 30
Gaumnitz and Reed, Some Problems Involved in Establishing
Milk Prices (U. S. Department of Agriculture, 1937). 16
Miscellaneous—Continued
17
Page
Hearings before Subcommittee No. 4 of the Committee on the
Judiciary on H.R. 4236, H.R. 6198, and H.R. 6324, 76th
Cong., 1st Sess. (1939) at 161. 10
Lininger, The Dairy Industry and the Agricultural Adjustment
Act (The Brookings Institution, Pamphlet Series No. 13)... 16
Sen. Rep. No. 1241, 74th Cong., 1st Sess. (1935). 16
Sen. Rep. No. 565, 75th Cong., 1st Sess. (1937). 19
Stitts and Gaumnitz, Relative Prices to Producers Under
Selected Types of Milk Pools (Farm Credit Administration,
Bulletin No. 5) . 16
The New York Market Administrator’s Bulletin. 14
©niteb States (Court of Appeals
FOB THE DISTRICT OF COLUMBIA CIRCUIT
October Term, 1949
Nos. 10,365 and 10,366
Charles F. Brannan, Secretary of Agriculture,
APPELLANT
V.
Delbert 0. Stark, A. F. Stratton, A. R. Denton, G.
Stebbins, and F. Walsh, appellees
Dairymen’s League Co-operative Association, Inc.,
appellant
v.
Delbert 0. Stark, A. F. Stratton, A. R. Denton, G.
Stebbins, and F. Walsh, appellees
ON APPEAL FROM A JUDGMENT OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
REPLY BRIEF FOR THE SECRETARY OF AGRICULTURE,
APPELLANT
RESTATEMENT OF THE ISSUES
A restatement of the issues is necessary, in view of the
appellees’ brief, in order to impose precision upon the ad¬
verse arguments. The appellees stake the case on a reading
(1)
2
of the statute and the provisions in the Boston milk order;
no question is presented by the appellees as to whether
substantial evidence supports the findings of the Secretary
that the payments to co-operatives, for the services per¬
formed, are necessary to effectuate the classification, pric¬
ing, and pooling provisions of the order. The appellees
submit (appellees’ brief, pp. 5-8) as their decisive conten¬
tions that (1) the payments to co-operatives are “adjust¬
ments” in the minimum prices fixed under §8c(5) of the Act,
and that such adjustments for payments to co-operatives
are not authorized by $ 8c(5) and are, therefore, violative
of the Act inasmuch as § 8c(5) sets forth the “only” adjust¬
ments that may be made; and (2) the activities of a co-oper¬
ative for which payments are made, as set forth in the order,
are “primarily, and almost exclusively, to its own mem¬
bers” but even if the co-operatives do perform market-wide
services of value to all producers, payments for such mar¬
ket-wide services are “inconsistent” with § 8c(5) and,
therefore, cannot be regarded as incidentally necessary un¬
der § 8c(7) (D) of the Act. The relevant sections of the Act
and the order are in the Appendix, infra , pp. 32-42.
SUMMARY OF ARGUMENT
The requirements of the Act with respect to uniform
prices relate to payments for milk. The payments to co¬
operatives, however, are for services performed, and not
for milk sold or delivered. Also, if the uniform prices
are subject only to the adjustments enumerated in § 8c(5)
(A) and (B) of the statute, as contended by the appellees,
it is clear nonetheless that the adjustments result in some
producers receiving more than other producers for the
same volume of milk. The statute permits variations, i.e.,
adjustments, in the payment of the uniform prices, but
that is not involved in this case. The payments to the
co-operatives are for market-wide services, and there is no
variation or adjustment in the uniform class price or in the
uniform blended price for milk.
The co-operative payments are subtracted, under the
terms of § 904.8(b) of the Boston order, prior to the result
of the computation of the uniform blended price; under
3
the plain terms of the order the uniform blended price is
paid without any variation or adjustment, in that price, for
co-operative payments. The only adjustments to the uni¬
form blended price in the order are those expressly enumer¬
ated in § 8c(5) (B) of the Act.
The Act “does not specify the detailed method by which
a blended or uniform price is to be computed.” Green
Valley Creamery v. United States (C. A. 1), 108 F. 2d 342,
345. If milk orders are to be effective or operative, some
necessary subtractions—in addition to the subtractions for
co-operative payments—have to be made in the process of
arriving at the uniform blended price. An irrefutable ex¬
ample is in § 904.8(b) (7) of the Boston order whereby sub¬
traction is made for establishing and maintaining a cash
reserve. Each of the 26 milk orders for market-wide pools,
effective under the Act, provides for a cash reserve by
means of subtractions in the process of computing or arriv¬
ing at the uniform blended price. In the absence of a cash
reserve, the failure of any handler to make full payment to
the Market Administrator would result in the insolvency
of the equalization fund; and the insolvency of the equali¬
zation fund would inevitably destroy uniformity in prices
under the Act. The subtraction of the money for a cash
reserve—just as the subtraction for co-operative payments
for services rendered—does not, in any way, introduce a
variation or additional adjustment to the uniform prices
under § 8c(5) (A) and (B) of the statute.
Another example of a necessary subtraction in the process
of computing the uniform blended price is in the original
New York order (7 CFR, 1938 Supp., 927.1 et seq.) for the
New York metropolitan marketing area effective September
1, 1938. Under that order from September 1, 1938, to No¬
vember 16, 1942, the total of approximately 13 million dol¬
lars was paid to handlers—not merely to co-operatives—
for performing market-wide services in diverting milk from
fluid milk plants to manufacturing plants for processing
into certain products. These diversion payments, as de¬
scribed in Grandview Dairy v. Jones (C. A. 2), 157 F. 2d
5, 6, certiorari denied, 329 U. S. 787, involving claims for
4
diversion payments for market-wide services, were sub¬
tracted—in the same manner as co-operative payments are
now subtracted—in the computation of the uniform blended
price.
The milk orders reveal other instances in which it has
been necessary to make various subtractions, e.g., season¬
ality payments to encourage dairy farmers to produce more
milk in periods of short supply and less milk in periods of
surplus milk; and the subtractions do not introduce any
additional adjustment or variation in the payment of the
uniform blended price. Making a subtraction in computing
the uniform blended price is governed by the standard of
what is “incidental . . . and necessary,” on the basis
of evidence at the public hearing, to make effective the
classification, pricing, and pooling provisions in the order.
Subtracting milk from the pool or subtracting payments
for marketwide services is in accord with the rationale of
Green Valley Creamery v. United States (C. A. 1), 108
F. 2d 342, 345, and United States v. Rock Royal Co-opera¬
tive, Inc., 307 U. S. 533, 565-566, 575-576.
The provisions in § 8c(5) (A) and (B) of the Act are not
requirements of “literalness or consumptive ultimacv” but
should be given such meaning as will not defeat the regula¬
tory purpose of the Act. Bailey Farm Dairy Company v.
Anderson (C. A. 8), 157 F. 2d 87, 94, certiorari denied,
329 IT. S. 788. There can be no doubt that Congress gave
the Secretary broad discretion in the administration of
the Act. Queensboro Farm Products, Inc. v. Wickard (C.
A. 2), 137 F. 2d 969, 977; and Waddington Milk Company v.
Wickard (C. A. 2), 140 F. 2d 97, 100.
The payments to co-operatives for market-wide services
are not antithetical or repugnant to the terms and condi¬
tions in § 8c(5) of the Act, and there is therefore no basis
for the appellees’ contention that the payments to co¬
operatives are “inconsistent” under §Sc(7)(D) of the Act
with the terms or conditions in § 8c(5) of the statute. A
provision is “inconsistent” only if it is contradictory and
antagonistic in the sense that the one nullifies the other
so that the two cannot co-exist. There is no such repug-
5
nance in this case. It is uncontroverted that the making of
co-operative payments does not prevent the making of the
adjustments expressly authorized by §8c(5)(A) and (B)
of the statute. There is no antithesis between the co-opera¬
tive payments for services rendered and the statutory ref¬
erence to a uniform class price or a uniform blended price
for milk sold or delivered.
Assuming, arguendo, that the payments to co-operatives
are adjustments to the uniform prices in addition to the
adjustments set forth in § Sc(5) (A) and (B), the payments
to co-operatives are permissible under §8c(7)(D) of the
Act. The prefatory passages in §8c(5) and §8c(7) of
the Act expressly state that a milk order may contain terms
or conditions based on either of those sections. It is set¬
tled that a milk order may contain auxiliary provisions
under §8c(7). United States v. Rock Royal Co-operative,
Inc., 307 U. S. 533, 575-576. Each term or condition in
§8c(5)(A) and (B) is qualified by the introductory ref¬
erence to additional provisions that may be included under
§8c(7)(D) of the statute. Any reference in §8e(5)(A)
and (B) to the adjustments therein set forth as being
the “only” adjustments means that those are the only ad¬
justments except as provided in §8c(7)(D) of the Act.
This construction of the Act gives meaning and significance
to all of its provisions.
The Boston order is explicit in requiring the performance
of market-wide services by the co-operatives that receive
the payments. The appellees’ criticism of the order in
this respect fails to refer to other significant provisions in
§ 904.10(b) of the order. Moreover, the bill of complaint
(Joint App. 1-7) does not assert a failure to be explicit
in the order; the complaint asserts the absence of any statu¬
tory authority for co-operative payments. If this is an
instance in which the order should be more explicit in set¬
ting forth the market-wide services to be performed by the
co-operatives, any such defect is independent of, and has no
relevance to, the statutory authority to provide in an order
for necessary payments to co-operatives for market-wide
services. If the appellees are now to question whether these
6
services, as set forth in the order, are necessary to effectuate
the declared policy of the Act, a review of the hearing record
is necessary. The appellees failed to include in the record
in this case the hearing record on which the provisions for
co-operative payments are now in effect. That forecloses,
in the absence of a prohibition in the Act, any question
as to the validity of these provisions. Shields v. Utah
Idaho Central R . Co., 305 U. S. 177. The findings of
the Secretary, on the basis of the evidence at a public
hearing, carry a presumption of the existence of a state
of facts justifying the action. United States v. Rock Royal
Co-operative, Inc., 307 U. S. 533, 567-568; and Queensboro
Farm Products v. Wickard (C. A. 2), 137 F. 2d 969, 977-9S1.
ARGUMENT
7. The Uniform Prices Under § 8c(5) of the Act
Relat&Vto Payments for Milk. The Payments to Co-op¬
eratives are for Services Performed, and not for Milk
Sold or Delivered by Producers. The Co-operative
Payments, for Services Performed under the Order,
are Permissible Subtractions in the Computation of
the Uniform Blended Price, and are not Variations or
Adjustments to the Uniform Prices under the Act.
The appellees’ argument (appellees’ brief, pp. 5-8) is
that the payments to cooperatives “creates a new price
adjustment,’’ and is therefore violative of the provisions in
§ Sc(5)(A) and (B) of the Act, which provide for uniform
prices to be paid for milk “subject only” to the adjustments
set forth in §8c(5)(A) and (B) of the statute. The ap¬
pellees’ argument is refuted by the plain provisions of the
Act and the order, and the appellees’ argument, in seeking
a constringent construction of <§>8c(5)(A) and (B) of the
Act, conflicts with the interpretation and application of
those provisions of the statute in United States v. Rock
Royal Co-operative, Inc., 307 U. S. 533; Green Valley Cream¬
ery v. United States (C. A. 1), 108 F. 2d 342; Queensboro
Farm Products, Inc., v. Wickard (C. A. 2), 137 F. 2d 969;
Waldington Milk Company v. Wickard (C. A. 2), 140 F.
2d 97; Grandview Dairy v. Jones (C. A. 2), 157 F. 2d 5,
certiorari denied, 329 U. S. 787; and Bailey Farm Dairy
7
Company v. Anderson (C. A. 8), 157 F. 2d 87, certiorari
denied, 329 U. S. 788.
It is provided in § 8c(5) (A) of the Act 1 that the minimum
class prices for milk sold or delivered by producers shall
be uniform, subject to the variations or adjustments therein
set forth; and under §8c(5)(B) of the Act the blended
price for milk sold or delivered by producers shall be uni¬
form subject to the variations or adjustments set forth
in §8c(5)(B). These requirements of uniformity, subject
to the enumerated variations or adjustments, permit all
producers to share equitably in the disposition of the milk
that is priced under the order. The co-operative payments
are not made for milk sold or delivered, but for services
performed. The co-operative payments cannot, therefore,
be said to impinge on the “uniformity” requirements rela¬
tive to the class prices or the blended price to be paid for
milk. An analysis of the pricing provisions in the order
reveals that a payment to co-operatives, for services per¬
formed, does not constitute a variation or adjustment in the
uniformity of the class prices or in the uniformity of the
blended price to be paid for milk sold or delivered by pro¬
ducers.
The minimum class prices under the order apply to the
two “use” classifications prescribed in accordance with
§8c(5)(A) of the Act. There is no requirement in the
statute that a uniform blended price must be provided
for in addition to the minimum class prices, but the evi¬
dence as to market conditions in the Boston area is, as
explained in Stark v. Wickard, 321 U. S. 288, 295, that
“serious inequities as among producers might arise if the
prices received depended on the use the handler might
happen to make of his milk,” and therefore under §8c(5)
(B) of the Act, “provision is made for the payment to
producers of a uniform [blended] price for the milk de¬
livered irrespective of the use to which the milk is put by
the individual handler.” The payment of the uniform
blended price is accomplished by an equalization or pro-
1 This section of the Act and related sections are set forth in the
Appendix to this brief, infra , pp. 32-36.
8
ducer-settlement fund under § 8c(5) (C) of the statute.
Stark v. Wickard, 321 U. S. 288, 295; and United States v.
Rock Royal Co-operative, Inc., 307 U. S. 533, 571. The han¬
dler whose milk has a use value in excess of the minimum
blended price pays the excess into the equalization or pro¬
ducer-settlement fund, and the handler who puts his milk to
a lower value use than the minimum blended price receives
the difference from the Market Administrator out of the
equalization or producer-settlement fund.
The uniform blended price is computed in accordance
with the terms in <§904.8 of the order 2 , and in short the
computation is made in this manner: The Market Admin¬
istrator computes the value of milk for each handler by
multiplying the quantities used by the handler in each
class by the class price and by adding the two results.
Then the values for all handlers are combined into one
total. That total is increased or decreased by several nec¬
essary additions and subtractions, including a subtraction
for payments to co-operatives for market-wide services.
The resulting total is then divided by the total quantity
of milk, and the result is described in <§ 904.S(b) (7) of the
order as the basic or uniform blended price.
The producers receive 3 the uniform blended price, sub¬
ject only to the adjustments enumerated in the order, e. g.,
the butterfat differential under <§ 904.9(d) and the location
differential under § 904.9(e) of the order. But to the uni-
2 This section of the order and related sections are set forth in
the Appendix to this brief, infra, pp. 36-42.
3 In some instances a handler, by reason of having a utilization
of milk higher than the average for the milk during that month,
will be obligated, under the class prices, to pay more for his milk
than the uniform blended price. In such case, the handler pays
the uniform blended price to his producers and pays the balance
to the Market Administrator for deposit in the equalization or
producer-settlement fund, and this money is then used to pay
handlers who, by reason of having a greater utilization of milk
in the lower class, are obligated to pay, under the class prices for
their milk, less than the uniform blended price. The Market Ad¬
ministrator pays to each such handler a sum which, when added
to the total value of the handler’s milk at the class prices, will en¬
able him to pay his producers at the uniform blended price. In
this method equalization is effectuated among handlers.
9
form blended price there is no exception, variation, or
additional adjustment for payments to co-operatives for
services performed.
The statute states in §8c(5)(B) that a milk order may
provide “for the payment to all producers and associations
of producers delivering milk to all handlers of uniform
prices for all milk so delivered . . . subject . . . only
to adjustments for (a) volume, market, and production dif¬
ferentials customarily applied by handlers subject to such
order, (b) the grade or quality of the milk delivered, (c)
the locations at which delivery of such milk is made, and
(d) a further adjustment, equitably to apportion the total
value of the milk purchased by any handler, or by all
handlers, among producers and associations of producers,
on the basis of their marketings of milk during a repre¬
sentative period of time.” Under the terms of the Boston
order, the uniform blended price is paid for all milk
sold or delivered, and the payment of the uniform blended
price is not subject to an exception, variation, or additional
adjustment for payments to co-operatives for services
performed. The very terms of the order refute the ap¬
pellees’ contention that a payment to co-operatives for
services rendered is an additional adjustment to the uni¬
form blended price. 4
It is also contended by the appellees (appellees’ brief,
p. 26) that even though there is no “adjustment” for co¬
operative payments, nonetheless the method for computing
* The payments to co-opcratives are to reimburse, in part at least,
the co-operatives for expenses incurred in the performance of market¬
wide sendees of substantial value to the market as a whole. The
appellees do not question that substantial evidence supports the
Secretary’s findings as to the necessity for these payments and
sendees. It may be reasonably concluded that the uniform blended
price is higher than it would have been if these market-wide sen-
ices had not been performed. The appellees’ argument merely comes
to the point that if these market-wide services were performed by
the co-operatives wdthout being paid to do so, then the blended
price would be higher. It cannot be expected that the co-operatives
can perform the market-wide senices without some reimbursement
for the additional expenses incurred in the performance of the
senices.
10
the uniform blended price does not, under the statute, per¬
mit any latitude for a subtraction—such as is made for
co-operative payments—from the fund prior to the computa¬
tion of the uniform blended price. The appellees’ argu¬
ment is in conflict with the holding in Green Valley Cream¬
ery v. United States (C. A. 1), 108 F. 2d 342, 345, that the
Act “does not specify the detailed method by which a
blended or uniform price is to be computed.” The ap¬
pellees’ assertion that any latitude or allowable discretion
with respect to the computation of the blended price leaves
“the fund entirely unprotected” fails to recognize that
the standard of necessity governs the Secretary in pre¬
scribing the terms or conditions under the “incidental
. . . and necessary” authorization in §8c(7)(D) of the
Act. It can hardly be said that the fund is left “entirely
unprotected” if the Secretary’s action, in order to achieve
the economic goal set forth in §Sc(18) of the Act, is gov¬
erned by a finding, on the basis of the evidence adduced at
a public hearing, that each regulatory provision in the
order is “necessary” to effectuate the declared policy of
the Act. 5 It is settled that in addition to the terms and con¬
ditions set forth in §8c(5) of the Act, a milk order may
contain additional provisions under § 8c(7) (D) “auxiliary
•'* The Secretary, in seeking the economic goal set forth in the
statute, is not dealing with concrete factors but factors that “are
extremely intangible, such as different types of economic situations,
broad objectives that must be definitized to meet concrete situations,
different methods of control, technical methods and procedures and
a variety of relationships.” Hearings before Subcommittee No. 4
of the Committee on the Judiciary on H.R. 4236, H.R. 6198, and
H.R. 6324, 76th Cong., 1st Sess. (1939) at 161. Wide discretion
is vested in the Secretary in devising methods or regulatory plans
to achieve the economic goal of the statute. Queensboro Farm
Products v. Wickard (C.A. 2), 137 F. 2d 969, 980. The “mon¬
strous difficulty” of classifying, pricing, and pooling milk and the
“multifarious ramifications of such a subject as milk regulation”
are such that with respect to some of its aspects “we [the Judiciary]
should have to endow them [the administrators] with almost super¬
human powers, if they were not, like ourselves, at the outset stunned
and confounded by the fantastic proliferation which emerges.”
Dairymen's League Co-operative Association , Inc. v. Brannan
(C.A. 2), 173 F. 2d 57, 65, the opinion of the Court being by Judge
Learned Hand.
11
to those definitely specified” in §8c(5) of the statute.
United States v. Rock Royal Co-operative, Inc., 307 U. S.
533, 575-576.
There is nothing in the Act—and the appellees have
pointed to nothing in the Act—that prohibits the Secre¬
tary from making a necessary subtraction in the computa¬
tion of the uniform blended price. The necessity for such
latitude, if milk orders are to be operative, is evident
from inescapable examples. In § 904.8(b) (7) of the Boston
order, it is provided that in computing the uniform blended
price the Market Administrator shall subtract not less
than four cents nor more than five cents per hundredweight
“for the purpose of retaining a cash balance in connec¬
tion with the payments set forth in <§> 904.9. ’ ’ That sub¬
traction—not referred to in the statute—is the last step
in the process of computing the uniform blended price.
If there were no provision in the order for this subtraction
for the purpose of accumulating and maintaining the cash
reserve, the total amount of money required to be paid by
all the handlers in the market to all of their producers
would exactly equal the total of all of the milk at the
established class prices; and the payments required to be
made into the equalization or producer-settlement fund
would exactly equal the amounts required to be paid out
of the fund. Hence the failure of any handler to make full
payment to the Market Administrator would result in the
insolvency of the equalization or producer-settlement fund.
In that situation the Market Administrator could not make
full payment out of the fund, and the failure of a handler
to receive full payment due from the fund would be regarded
as relieving him from the obligation to pay producers at
the uniform blended price. If, on the contrary, the handler
should be required to pay the uniform blended price with¬
out having received full payment from the equalization or
producer-settlement fund, the handler would pay for his
milk at a rate above the uniform class prices set forth in the
order. This would destroy uniformity in prices under
§8c(5)(A) of the Act. In addition, if the handler main¬
tained uniformity with respect to the class prices under
12
§ Sc(5) (A) of the Act, it could be done only by paying his
producers less than the uniform blended price and thereby
destroying uniformity under §8c(5)(B) of the Act.
It cannot be expected, as a practical matter, that every
handler in a large metropolitan marketing area will always
make full payment to the equalization or producer-settle¬
ment fund within the time specified in the order. Errors
in reports by handlers, controversies with respect to the
classification of milk, and other circumstances may result in
delays in making full payments to the equalization or pro¬
ducer-settlement fund. Each of the 26 milk orders for
market-wide pools contains a provision, therefore, for
the establishment of a cash reserve. The subtraction of the
money for the cash reserve, in computing the uniform
blended price, does not affect at all the degree of uniformity
between producers as to the prices that they receive for
their milk. The deduction for the cash reserve is made
prior to the result that is known as the uniform blended
price, and the uniform blended price is paid to producers
without any variation or adjustment for the cash reserve.
The appellees’ argument that there is no authority in the
statute for the making of any subtraction in the process of
computing the uniform blended price would, in some major
instances, prevent the Secretary from effectuating the eco¬
nomic objectives of the statute. An example which involved
payments to handlers—not merely payments to co-opera¬
tives—for performing market-wide services is found in the
original order (7 CFR, 1938 Supp., 927.1 et seq.) for the
New York metropolitan marketing area, effective September
1, 1938. The necessity for the diversion of milk from fluid
milk plants to manufacturing plants was so compelling that
on the basis of the evidence at the bearing, the Secretary
provided, in the New York order, for payments to handlers
for diverting milk “received from producers at a plant
. . . , equipped only for the receiving and shipping of
milk to the marketing area, which was . . . moved to a
plant where it was utilized” in the production of certain
milk products and from which “no Class I milk was shipped
to the marketing area during such month.” These diver-
13
sion payments to handlers were subtracted, under § 927.7
(b) (2) of the New York order, in the computation of the
uniform blended price, and therefore the uniform blended
price was paid to producers without any variation or ad¬
justment in that price for the diversion payments to hand¬
lers for market-wide services. This is described in Grand¬
view Dairy v. Jones (C. A. 2), 157 F. 2d 5, 6, certiorari de¬
nied, 329 U. S. 787, involving claims for diversion payments
for market-wide services under the order:
. . Each handler is required to report to the
Milk Administrator the quantity of milk used in each
class. The total of the use value of all handlers ( less
the total allowance made to all such handlers as have
diverted excess fluid milk into market products under
the terms of Sec. 927.7(f) ) is divided by the total
quantity of milk received from all producers. The re¬
sult is announced by the Milk Administrator as the
uniform price to be paid by all handlers to producers.
The variance among handlers in the percentage of milk
used in a given class will normally mean that the total
use value for a particular handler may be greater or
less than the total payments at the uniform price re¬
quired to be made by him to his producer. Any handler
for whom there is a plus difference is required to pay
the difference into the Producers-Settlement-Fund,
while any handler for whom there is a minus difference
is entitled to withdraw the difference from the fund.
Payments into the fund constitute the only source of
withdrawal from the fund. This price mechanism is
applicable to each monthly delivery of milk. Handlers
are entitled to an allowance paid out of the Producers-
Settlement-Fund known as marketing service or diver¬
sion payments for diverting excess fluid milk into milk
products. The uniform prices paid to producers are
reduced as against the handlers to the extent of the
aggregate amount of such allowance. Diversion allow¬
ances may be had where the plant of the handler is
equipped only for the receiving of milk for disposition
in the marketing area. The plant of diversion must be
a second plant located outside the marketing area.”
(Emphasis supplied.)
The need for diversion payments to handlers under the
New York order became less pronounced during the early
14
part of the war, and eventually the order was amended
(7 F.R. 9109) so as to eliminate the provisions for pay¬
ments to handlers for market-wide services in diverting
milk from fluid milk plants to manufacturing plants. But
from September 1, 1938, to November 16, 1942, the per¬
formance of these services by handlers was a major factor 6
in making effective the classification, pricing, and pooling
provisions in the New York order. The appellees’ argu¬
ment that the Secretary has no discretion or authority to
make any subtraction in the computation of the uniform
blended price would prohibit the making of diversion or
market service payments to handlers as set forth in the
sections of the New r York order involved in Grandview
Dairy , Inc . v. Jones (C. A. 2), 157 F. 2d 5, certiorari denied,
329 U. S. 787.
A similar subtraction is made in the Louisville milk order
(7 CFR, 946.7(b)(3)), for seasonality payments, and the
subtraction—as with co-operative payments—is made in
the computation of the uniform blended price, and the uni¬
form blended price is paid to producers without any varia¬
tion or adjustment to that price for the seasonality pay¬
ments. Other orders also contain a similar provision for
these payments designed to encourage dairy farmers to
produce more milk in the periods of short supply and less
milk in the periods of surplus supply. The appellees’ argu¬
ment that the Secretary has no discretion or leeway in
the computation of the uniform blended price -would render
the Secretary impotent to deal with the pressing needs of
6 The claims by various handlers for payments involved in the
narrow issue in Grandview Dairy, Inc. v. Jones (C.A. 2), 157 F.
2d 5, totaled in excess of one million dollars. See, the Record, p.
51, in No. 619 in the Supreme Court of the United States for the
October Term. 1946, in Grandview Dairy, Inc. v. Jones, on petition
for certiorari to the United States Circuit Court of Appeals for
the Second Circuit, certiorari denied, 329 U. S. 787. The total
of the diversion payments to handlers under the New York order
was approximately thirteen million dollars. The New' York
Market Administrator’s Bulletin, Vol. 3, No. 7 (January 1943),
pp. 8-9.
15
these milk markets in which the orders provide for these
payments. 7
The validity of the subtractions for necessary payments
in the computation of the uniform blended price is in accord
with the rationale of Green Valley Creamery v. United
States (C. A. 1), 108 F. 2d 342, 345, permitting the exclusion
of milk, under certain circumstances, from the pool—even
though the milk thus excluded is priced under the order—
in the computation of the uniform blended price; it being
the opinion of the Court that the “method adopted . . .
seems reasonably adapted to promoting the successful oper¬
ation of the equalization pool,” and leeway in this respect
is granted by the Act inasmuch as it “does not specify the
detailed method by which a blended or uniform price is to
be computed.” Moreover, the exclusion of milk from the
pool, in applying the uniform blended price, was upheld in
United States v. Rock Royal Co-operative, Inc., 307 U. S.
533, 565-566.
Subtracting milk or subtracting payments from the pool,
in computing the uniform blended price, is governed by the
standard of what is “incidental . . . and necessary”
to make effective the classification, pricing, and pooling
provisions in the order. If the requisite necessity exists,
the Secretary is authorized by the statute to include, under
7 There are other instances in which it has been necessary for
the Secretary to provide for subtractions in the computation of
the price for milk. See e.g., the order (7 CFR, 934.1 et seq.) for
the Lowcll-Lawrence marketing area in which the composite price,
for the individual handler pool under §8c(5) (B) (i) of the Act, is
arrived at after a subtraction, in § 934.9(b) (2) of the order, of
“any amounts which the handler is required to pay on such milk
pursuant to those provisions of the order of the Secretary regulating
the handling of milk in the Greater Boston, Massachusetts, market¬
ing area (i) which requires a handler under that order who operates
an unregulated plant from which outside milk is disposed of to
consumers in the Greater Boston, Massachusetts, marketing area,
without intermediate movement to another plant, to make pay¬
ments to producers as defined in that order, and (ii) which require
payments for administrative expense under that order.” In the
absence of such subtractions for milk under the Lowell-Lawrence
order that is also regulated in some respects by the Boston order,
uniformity of prices for milk could not be properly achieved.
16
§ 8c(7)(D) of the Act, provisions “auxiliary to those defi¬
nitely specified” in § 8c(5) of the Act. United States v.
Rock Royal Co-operative, Inc., 307 U. S. 533, 575-576. If
the uniform prices are “subject only” to the adjustments
set forth in detail in § 8c(5) of the Act, as contended for by
the appellees, the remaining area for the use of auxiliary
provisions in milk orders is in relation to the computation
of the uniform blended price as to which the Act does not set
forth any details. Green Valley Creamery v. United States
(C. A. 1), 108 F. 2d 342, 345.
The making of necessary subtractions, for payments for
market-wide services, in the computation of the uniform
blended price is consonant with the methods of pooling by
co-operatives at the time of the enactment of this legislation
and as to which Congress included authority in the statute
for such methods of pooling to be included in milk orders.
The principles of class prices, on the basis of “use classi¬
fication,” and the pooling of milk were developed 8 by the
co-operatives and later included by Congress in the Act. 9
The pooling practices of co-operatives related to a mingling
or averaging of prices w’hereby the sales and expenses w’ere
apportioned among the producers in the group. 10
s Gaumnitz and Reed. Some Problems Involved in Establishing
Milk Prices (U.S. Department of Agriculture, 1937), pp. 30-41;
and Liningcr. The Dairy Industry and the Agricultural Adjust¬
ment Act (The Brookings Institution, Pamphlet Series No. 13), pp.
13-19. Pooling by a co-operative tends to prevent discrimina¬
tion in the allocation of surplus milk within that group of producers,
and thereby permits all members of that co-operative to share
equally in the co-operative’s share of the fluid milk market, i.e.,
the higher priced milk. Under the Boston order, however, a handler
is not required to buy or accept delivery of milk, surplus or other¬
wise; and by declining to buy or accept delivery of milk a handler
may, in the absence of some other outlet for the milk, place on a
particular producer or co-operative an unequitable share and dis¬
proportionately heavy burden of surplus milk.
9 "These terms [of classifying, pricing, and pooling milk under
§8c(5) of the Act] follow the methods employed by co-operative
associations of producers prior to the enactment” of this legislation.
Sen. Rep. No. 1241, 74th Cong., 1st Sess. (1935) p. 9.
10 Stitts and Gaumnitz, Relative Prices to Producers Under
Selected Types of Milk Pools (Farm Credit Administration, Bulle¬
tin No. 25, June 1938), pp. 1-4.
17
The argument of the appellees that the provisions in
§ 8c(5) of the statute are rigid symbols or a code of abso¬
lutes is in conflict with the holding in Bailey Farm Dairy
Company v. Anderson (C. A. 8), 157 F. 2d 87, 94, certiorari
denied, 329 U. S. 788, that §8c(5)(A) and (B) of the Act
is not to be read with “a literal significance which would
defeat the regulatory purpose of the Act,” and provisions
in that section are not to be regarded as requirements of
‘ 4 literalness or consumptive ultimacy, ’ ’ but should be ‘ ‘ given
practical regulatory significance in relation to handlers’
processes and the effect of their mode of doing business
upon the market problem.”
The appellees’ argument for a narrow and constringent
construction with respect to § 8c(5)(A) and (B) is also in¬
consistent with the rationale in Waddington Milk Company
v. Wickard (C. A. 2), 140 F. 2d 97,100, in which it was held
that § 8c(5) (A) and (B) of the Act should be construed
with all of the other sections in the statute so as to give
significance to the “purpose for which classification is
made,” and the provision as to uniformity “should not con¬
trol or vitiate the classification directed in the first sentence;
the prices within the proper and authorized classifications
should be uniform, rather than that uniformity of prices
to handlers should be had, whatever has been the classifica¬
tion.” In the Waddington Milk Company case the Court
held (140 F. 2d at 101) that in dealing with § 8c(5) of the
statute:
“. . . it is necessary to have in mind the problems
confronting the Congress in passing the Act and the
Secretary in establishing the order. The need of regu¬
lation, as has so often been pointed out, was very great,
but so were the difficulties. No simple and arbitrary
classification of the milk to determine the form and
manner of payment to be made by the distributors
seemed adequate in view of the many different uses
to which fluid milk could be devoted and its prime neces¬
sity as an article of diet, the alternate periods of glut
and scarcity, so striking a feature of milk production,
the requirements of quick marketing or else of expen¬
sive storage, and the many other problems of the busi-
18
ness . . . Given the conditions and the purpose, there
appears to be nothing unreasonable in selecting as the
controlling point for determination for the form in
which milk is to be classified . . . the time when it
leaves the initial receiving plant of the distributor.”
The provisions in a remedial statute are not to be con¬
strued “as theorems of Euclid, but with some imagination
of the purposes which lie behind them.” Lehigh Valley
Coal Company v. Y ensavage, 218 Fed. 547, 553. The terms
of § Sc(5) of the Act are not to be interpreted so as to
render nugatory the legislative purpose for equalization
of the burdens of surplus milk. United States v. Rock
Royal Co-operative, Inc., 307 U. S. 533, 579-580. The terms
of a milk order “are largely matters of administrative dis¬
cretion,” and “the technical details are left to the Secretary
and his aides.” Stark v. Wickard, 321 U. S. 288, 310. What
was said in Licliter v. United States, 334 U. S. 742, 785, is
also an explanation of the situation here:
“It is not necessary that Congress supply adminis¬
trative officials with a specific formula for their guid¬
ance in a field where flexibility and the adaptation of
the congressional policy to infinitely variable condi¬
tions constitute the essence of the program. • • •
Standards prescribed by Congress are to be read in
the light of the conditions to which they are to be ap¬
plied. ‘They derive much meaningful content from
the purpose of the Act, its factual background and the
statutory context in which they appear.’ ”
The Congress recognized, in vesting in the Secretary
broad discretion with respect to the provisions to be in¬
cluded in a milk order, that a rigid and inflexible method
of pricing milk cannot be applied in dealing with the di¬
vergent and mutable situations in the various milk market¬
ing areas. “The intricate problems of the milk industry,
as described in the above cited opinion [Nebbia v. New
York , 291 U. S. 502], explain the use of the several pooling
and pricing plans authorized for inclusion in milk orders,”
and their “effectiveness depends upon their adaptability
19
to conditions affecting each marketing area and upon their
adjustment from time to time to meet changing conditions.”
Sen. Rep. No. 565, 75th Congress, 1st Sess. (1937), p. 3.
There can be no doubt 11 that Congress gave to the Secre¬
tary broad discretion in the administration of the Act.
Queensboro Farm Products , Inc. v. Wichard (C. A. 2), 137
F. 2d 969, 977.
The payments to co-operatives are not, under the plain
provisions of the order, adjustments to the uniform blended
price; the uniform blended price is paid for milk subject
only to the adjustments expressly authorized by § 8c(5) (B)
of the Act. 12 The co-operative payments are subtracted
prior to the result of the computation known as the uni¬
form blended price; and under $ 8c(7)(D) of the Act the
Secretary is authorized to make subtractions from or addi¬
tions to the pool in the process of computing the uniform
blended price whenever the requisite necessity exists on
the basis of evidence at a public hearing. Without that
authority, milk orders cannot be operative or effective.
11 This is given even greater emphasis by the failure of Congress
to amend the Act after it was apprised in 1940 of the administra¬
tive construction whereby co-operative payments are made under
the milk orders; and this creates a presumption in favor of the
administrative interpretation to which great weight should be given.
Costanzo v. Tillinghast, 287 U. S. 341, 345; McCaughn v. Hershey
Chocolate Company, 283 U. S. 488, 492-493; and Murphy Oil
Company v. Burnet, 287 U. S. 299, 302-303. In addition, the Act
of July 3, 1948, c. 827, 62 Stat. 1258, providing in Title III, §302
(e) of the enactment (7 U.S.C. Supp. II, 672), that all milk orders
in effect “shall continue in effect without the necessity for any
amendatory action” indicates an implied legislative recognition
and approval of the administrative construction of the statute.
National Lead Company v. United States, 252 U. S. 140, 146-147.
12 This result is not dependent on that part of § 8c (5) (B) which
authorizes an additional adjustment “equitably to apportion the
total value of the milk.” However, as explained in our main brief,
p. 27, that provision of §8c(5)(B) constitutes an adequate basis.
There is nothing in the statute to indicate that it is limited, in
this respect, to a “base rating plan,” as contended for by the ap¬
pellees (appellees’ brief, pp. 11-13).
20
II. The Payments to Co-operatives for Market-Wide
Services Are Not Antithetical or Repugnant to the
Terms and Conditions in Section 8c(5) of the Act.
There is, Therefore, No Basis for the Appellees' Con¬
tention That the Payments to Co-operatives are “In¬
consistent” Under Section 8c(7) (D) of the Act With
The Terms or Conditions in Section 8c(5) of the
Statute.
The appellees assert (appellees’ brief, p. 24) that even if
the payments to co-operatives for market-wide services
are incidental and necessary under § 8c(7)(D) of the Act
in order to effectuate the classification, pricing, and pooling
provisions of the order, nonetheless the payments to co¬
operatives are prohibited by the provision in § 8c(7)(D)
against including a provision that is “inconsistent with”
§ 8c(5). This argument by the appellees conflicts with the
established rule that an “inconsistent” limitation in a stat¬
ute merely applies to provisions that are contradictory and
antagonistic in the sense that one nullifies the other so that
the two cannot co-exist. Bodkin v. State, 132 Neb. 535, 272
X.W. 547; Bond v. Phelps, 200 Okla. 70, 191 P. 2d 938;
Belknap v. Shock, 125 W. Va. 385, 24 S.E. 2d 457; Common¬
wealth v. Staunton Mutual Telephone Co., 134 Va. 291, 114
S.E. 600, 603; State ex rel. Kipker v. City of Lima, -
Ohio App.-, 32 N.E. 2d 488, 496; and City of Mobile v.
Collins, 24 Ala. App. 41, 130 So. 369, 371. The mere lack
of uniformity is not necessarily proof of inconsistence.
Ketchum v. United States (C. A. 8), 270 Fed. 416, 417-420,
and In re Robertson (D.C. N.D. Tex.), 20 F. Supp. 270, 273.
For an inconsistent limitation in a statute to be applicable,
there must be a “positive repugnance.” Louisville Water
Company v. Clark, 143 XT. S. 1,11. If an auxiliary provision
is necessary in a milk order, it may be included under
§ Sc(7) (D) of the Act unless it is so antithetical to the pro¬
visions of § 8c(5) that the two cannot be operative at the
same time.
It is uncontroverted that there is no such antithesis in the
Boston milk order as to prevent the Market Administrator
21
from giving full effect to all of the provisions in the order,
including the adjustments expressly authorized by §8c(5)
(A) and (B) of the statute. It is uncontroverted that the pay¬
ments to co-operatives for market-wide services do not de¬
stroy or interfere in any way with making the other adjust¬
ments in the order expressly enumerated in § 8c(5) (A) and
(B) of the Act. No repugnance has been disclosed; none ex¬
ists. There is no antithesis or repugnance between the co¬
operative payments and the statutory reference in § 8c(5)
(A) and (B) to the ‘‘uniform” class price or a “uniform
blended price.” The co-operative payments are subtracted
prior to the time of the result of the computation of the uni¬
form blended price, and the uniformity of that price remains
unimpaired. 13 The co-operative payments are made without
in any way being repugnant to the minimum class prices, and
the uniformity of each class price remains unimpaired.
Since the Act requires uniformity only with respect to the
blended price and the class prices, whether high or low, the
provisions in the order plainly provide that these prices
shall remain uniform, subject to the adjustments expressly
authorized by the statute. In this way meaning and signifi¬
cance are given to the statutory authorization for the Secre¬
tary to include provisions under § 8c(7) (D) of the Act aux¬
iliary to those specifically set forth in § 8c(5).
13 The appellees’ brief, pp. 24-25, incorrectly refers to the butter-
fat and location adjustments in the Boston order as being sub¬
tracted—just the same as co-operative payments—in the com¬
putation of the uniform blended price. The order is plain, in
§ 904.9(d) and § 904.9(e), that the butterfat and location adjust¬
ments are made after the uniform blended price has been computed
and announced, and that those adjustments are, therefore, varia¬
tions or exceptions in the uniformity of the blended price. Those
adjustments are, in that respect, entirely different from the mere
subtractions for co-operative payments for services performed.
Also, the uniform blended price is computed (1) as of the 201-210
mile zone from the marketing area, and (2) on the basis of 3.7%
butterfat. To make a computation in that manner, butterfat and
location are relevant in the computation of the uniform blended
price, e. g., § 904.8(b) (4) of the order. But as “adjustments” or
variations in the uniformity of tfie blended price, as computed,
the location and butterfat differentials apply, under §§ 904.9(d) and
904.9(e), whereas no such variation or adjustment exists for co¬
operative payments.
22
The appellees’ argument is based on fragments of the
Act, and fails to recognize that all parts of the statute should
be considered, compared, and construed together. The stat¬
ute as a whole must be considered, in order not to give un¬
due effect to particular words or clauses. Helvering v.
New York Trust Company, 292 U. S. 455, 464; Costanzo v.
Tillinghast, 287 U. S. 341, 345; and White v. United States,
305 U. S. 281, 292. In interpreting a statute, “the Court
will not look merely to a particular clause in which general
words may be used, but will take in connection with it the
whole statute . . . and the objects and policy of the law,
as indicated by its various provisions, and give to it such
a construction as will carry into execution the will of the
Legislature, as thus ascertained, according to its true in¬
tent and meaning.” Brown v. Duchesne, 19 How. 183, 194.
The intention of Congress is to be ascertained “not by
taking the word or clause in question from its setting and
viewing it apart, but by considering it with the context, the
general purposes of the statute in which it is found, the
occasion and circumstances of its use, and other appropriate
tests for the ascertainment of the legislative will. ’ ’ Helver¬
ing v. Stockholms Enskilda Bank, 293 U. S. 84, 93-94. Any
questions that may arise upon a cursory examination of the
parts of the statute relied on by the appellees disappear
when those parts of the Act are read, as they must be, with
every other material part of the statute and in the light
of the legislative history.
HI. Assuming, Arguendo, That the Payments to Co¬
operatives Are “ Adjustments” to the Uniform Prices
in Addition to the Adjustments Expressly Set Forth
in § 8c(5) (A) and (B), Such Additional Adjustments
for Co-operative Payments Are Permissible Under
§ 8c(7) (D) of the Act.
The appellees argue (appellees’ brief, p. 9) that the
terms and conditions of a milk order must be found in
§ 8c(5) of the Act, and that § 8c(5) of the Act enumerates
certain adjustments that may be made in the uniform class
23
prices or in the uniform blended price, and since the
enumerated adjustments do not include co-operative pay¬
ments for market-wide services, there is no statutory au¬
thority for the payments to the co-operatives. Assuming,
arguendo, that the payments to co-operatives are adjust¬
ments in the minimum class prices or in the uniform blended
price, the appellees’ argument fails to give effect to other
statutory provisions under which the payments to co-opera¬
tives are authorized.
The prefatory statement in § 8c(5) of the Act is decisive
against limiting the provisions in milk orders to the terms
and conditions set forth in § 8c(5):
“In the case of milk and its products, orders issued
pursuant to this section shall contain one or more of
the following terms and conditions, and (except as pro¬
vided in subsection (7)) no others . . . .”
Every term or condition in § 8c(5)(A) and (B) of the Act
is qualified by the introductory passage. The terms and
conditions in § 8c(5)(A) and (B) of the statute are not all
the terms and conditions that may be included in a milk
order; additional provisions may be included under § 8c(7)
of the Act. Plainly, the terms of the milk order may be
based on § 8c(5) or on § 8c(7) of the statute.
The refutation of the appellees’ argument is also found
in the prefatory passage in § 8c(7) that “orders shall con¬
tain one or more” of the terms and conditions set forth in
§ 8c(7) of the Act. If orders “shall contain” provisions
under § 8c(7) of the Act, then auxiliary provisions under
§ 8c(7) may be included in addition to those set forth in
§ 8c(5). That § 8c(7) of the Act is a proper basis for pro¬
visions in a milk order is further emphasized by the statu¬
tory provision in subsection (B) of § 8c(7) that the regula¬
tory scheme in that subsection shall not apply to milk “sold
for consumption in fluid form.” Congress must have in¬
tended that the various subsections in § 8c(7) may be the
statutory basis for a provision in a milk order, otherwise
Congress would not have specified in subsection (B) of
§ 8c(7) that the particular method of regulation in that
24
subsection cannot be applicable to milk * ‘ sold for consump¬
tion in fluid form. ’ ’
Other provisions of the Act likewise make it clear that
§ 8c(5) does not set forth all the terms and conditions to be
incorporated in a milk order. In § 10 of the statute, it is
provided in subsection (b) that:
“Each order relating to milk and its products is¬
sued by the Secretary under this title shall provide that
each handler subject thereto shall pay to any authority
or agency established under such order such handler’s
pro rata share ... of such expenses as the Sec¬
retary may find will necessarily be incurred by such
authority or agency . . . for the maintenance and
functioning of such authority or agency. . . .”
The statute, as a whole, is plain that the provisions
of a milk order are not limited to those set forth in
§ 8c(5) of the statute. It is provided in § 8c(7) that a milk
order shall contain one or more of the terms and conditions
set forth in that section; and the authorization in subsec¬
tion (D) of § Sc(7) is that a milk order may include terms
or conditions that are “incidental to, and not inconsistent
with, the terms and conditions specified in subsections (5),
(6), and (7) and necessary to effectuate the other provi¬
sions of such order.” This reference in § 8c(7)(D) to sub¬
section (5) of §8(c) constitutes specific and unequivocal
statutory direction that auxiliary provisions may be in¬
cluded in addition to those enumerated in ^ Sc(5). The
statute, in its entirety, is plain that a milk order shall con¬
tain provisions based on § 8c(5), §8c(7), and § 10(b) of
the Act.
In analyzing the Act and sustaining its constitutionality,
it was held in United States v. Rock Royal Co-operative ,
Inc., 307 U. S. 533, 575-576, that under §8c(7) of the Act
provisions may be included in a milk order that are “auxili¬
ary to those definitely specified” in §8c(5) of the statute,
and the terms or conditions in a milk order may, therefore,
be based on the statutory authorizations “set out in
§ 8c(5) and (7).” This interpretation of the Act is con-
25
sonant with the principle that meaning and significance
should be given to each provision in the statute. Ex parte
Public Bank, 278 U. S. 101,104; Ginsberg & Sons v. Popkin,
285 U. S. 204, 208; Costmzo v. Tillimghast, 287 U. S. 341,
345; and White v. United States, 305 U. S. 281, 292.
Each provision in §8c(5)(A) and (B) of the Act is to
be read as qualified (1) by the introductory provision in
§8c(5) that “except as provided in subsection (7)” milk
orders are limited to the terms and conditions, including the
adjustments, set forth in §8c(5) of the Act, and (2)
by the introductory provision in §8c(7) that an order
“shall contain” one or more of the terms and conditions set
forth in §8c(7). Hence, the reference in subsections (A)
and (B) of §Sc(5) to the adjustments therein set forth as
being the “only” adjustments means that those are the only
adjustments “except as provided in subsection (7)” of
§ 8c of the statute. This gives meaning and significance to
all the statutory provisions, including the prefatory pas¬
sages in § 8c(5) and § 8c(7) of the Act; and those explicit
statutory statements constitute a part of the very substance
of the Act and must be given effect precisely as any other
provision. The appellees’ argument in this respect would,
if adopted, conflict with United States v. Rock Royal Co¬
operative, Inc., 307 U. S. 533, 575-576, holding that provi¬
sions under subsection (D) of §8c(7) may be included in
milk orders if the additional provisions are “auxiliary to
those definitely specified” in § 8c(5) of the Act.
The statute expressly sets forth certain provisions
that cannot be included in milk orders. Those prohibited
provisions, as explained in our main brief, pp. 28-29, con¬
stitute the only provisions which, as a matter of law, can¬
not be included, on the basis of evidence at a public hearing,
as being incidentally necessary. These prohibitions in
the statute give confirmation to the construction that addi¬
tional adjustments are permissible under §8c(7)(D) of
the Act. In short, the Act vests in the Secretary discretion
commensurate with the legislative goal. Cf. Secretary of
Agriculture v. Central Roig Refining Company, 338 U. S.
, 70 S. Ct. 403, 94 L. Ed. 297, decided on February 6, 1950.
26
The case of State v. Dairy Distributors, 217 Wis. 167, 258
X.W. 3S6, relied on by the appellees (appellees’ brief, p. 21),
relates to issues different in decisive respects from the
issues under the Boston order and the Act authorizing the
Boston order. The milk order issued bv the State authori-
ties, acting under a statute quite different from the Federal
Act, contained no finding as to any necessity for the assess¬
ment alleged to be an unlawful exaction, and the Court em¬
phasized (217 Wis. at 170, 258 N.W. at 388) that “We are
in no way enlightened as to what relation this contribution
has to the maintenance of the price of milk,” and the “com¬
mission nowhere finds that the imposition of such an exac¬
tion is necessary.” Moreover, in that criminal proceed¬
ing under the Wisconsin statute, the Court held that, “No
finding is made as to the jurisdictional facts which must ex¬
ist as a condition of exercising the power delegated” under
the state statute. That case has no bearing on the issues now
presented as to co-operative payments, for services found by
the Secretary to be necessary, under the Boston order.
IV. The Boston Milk Order Is Explicit in Requiring the
Performance of Market-Wide Services by the Co¬
operatives That Receive the Payments, and the Ap¬
pellees’ Criticism of the Order in This Respect Fails
to Refer to Other Significant Provisions in the Order.
The appellees assert (appellees’ brief, pp. 4-5) that the
services of a co-operative for which payments are received
under the order are “primarily, and almost exclusively, to
its owm members;” and the appellees seem to find signifi¬
cance in the asserted failure of the order to itemize or
enumerate all of the various market-wide services to be
performed by a co-operative that receives payments under
the order. The appellees’ brief is based, in this respect, on
only a part of the provisions of the order with respect
to co-operative payments, and fails to take into considera¬
tion other significant provisions in the order with respect to
co-operative payments for market-wide services.
27
The appellees refer only to subsection (a) of §904.10
of the order. 14 That subsection, however, is related to and
interlaced with the immediately following subsection, viz.,
subsection (b) of § 904.10, in which different rates of pay¬
ment are provided for. 15 The different rates of payment set
forth in § 904.10(b) relate to different marketing services.
The higher rate is generally descriptive of the service of a
co-operative in operating a manufacturing plant at which
surplus milk is received. The lower rate is generally
descriptive of bargaining co-operatives. The difference in
the rates of payment reflects the different levels of market¬
wide services performed by the two types of co-operatives.
The higher rate is designed as partial compensation to the
operating co-operatives for the greater cost incurred in
rendering the higher level of services.
Any co-operative that receives payment under the order is
required to collaborate with similar associations in the
classification, pricing, and pooling of milk under the order,
and payments are suspended by the Secretary whenever he
has reason to believe that the co-operative is not performing
the requisite services. 16 The co-operatives are required
to maintain a competent staff of economists and other ex-
14 This section of the order is in the Appendix to this brief,
injra, pp. 40-41.
13 This section of the order is in the Appendix to this brief,
infra, pp. 41-42.
16 The qualifications of co-operative associations are under con¬
stant scrutiny by the Secretary, and a co-operative that fails to
render the market-wide services is suspended and thereby denied
the right to receive co-operative payments. See, e.g., In the Matter
of Bethel Cooperative Creamery, Inc., a ruling on May 31, 1945,
under the Boston order; and under the New York order, In the
Matter of Sullivan County Cooperative Dairy Association, Inc.,
and New York State Guernsey Breeders’ Cooperative, Inc., rulings
of January 13, 1950, and September 2, 1943, respectively. In other
instances applications for payments have been denied after in¬
vestigation, e.g., In the Matter of Vermont Co-operative Creamery,
Inc., under the Boston order, determined June 22, 1945, and In
the Matter of Crowley’s Milk Producers Cooperative Association,
Inc., under the New York order, determined September 28, 1948.
These and other similar determinations are public records on file
in the office of the Hearing Clerk, U. S. Department of Agriculture,
Washington, D. C.
28
perts for dealing: with marketing problems and for provid¬
ing information with respect to these problems. In provid¬
ing this information by means of radio programs, and at
public meetings which are attended by nonmembers as well
as by members of the co-operatives, and in presenting data
at public hearings on amendments to the Boston order, it
is manifest that the services are market-wide in character.
In maintaining and operating manufacturing plants for
surplus milk, it is uncontroverted by the appellees that
the co-operatives are performing services which are of
benefit to all producers in the milkshed.
The bill of complaint asserts the absence of any statutory
authority for co-operative payments, and not the mere fail¬
ure to be explicit in the order. The appellees question the
authority under the statute, not the failure to be explicit in
the order. If this is merely an instance in which the order
should be more explicit in setting forth the market-wide
services to be performed by the co-operatives, the asserted
defect has no relevance to the statutory authority to pro¬
vide, in such orders, for payments to co-operatives for
market-wide services.
Moreover, the appellees (appellees’ brief, p. 35) do not
question the adequacy of the evidence to support the Sec¬
retary's finding that the provisions in the order for pay¬
ments to co-operatives are necessary in order to effectuate
the declared policy of the Act. If the appellees are now to
question whether these services, as set forth in the order,
are necessary to effectuate the declared policy of the Act,
a review of the hearing record is called for. The appellees
disclaim the necessity for any such review. 17 The hearing
record on which the present order provisions are based is
17 The references in the appellees’ brief, pp. 17, 20, and 21, to
the co-operative payments as being bounties, subsidies, or subven¬
tions is entirely irrelevant in view of the appellees’ failure to assert
an absence of substantial evidence to support the Secretary’s find¬
ings. As to whether the payments are bounties, subsidies, or sub¬
ventions depends on the services performed and the necessity for
the services; all of this can be resolved only on the basis of whether
substantial evidence supports the Secretary’s findings on the basis
of the evidence adduced at the public hearing.
29
not before the Court. There can be no merit, therefore, in
the appellees’ criticisms of the provisions in the order
with respect to the types of services to be performed by
the co-operatives who qualify for payments under the
order.
V. The Scope of Judicial Review is Limited, and the
Validity of the Provisions for Payments to Co-opera¬
tives Depends on Whether Substantial Evidence in
the Hearing Record Supports the Secretary’s Find¬
ings. The Hearing Record on Which the Present
Order Provisions are Based is Not Before This Court
and, Therefore, Since the Provisions for Co-operative
Payments are Not Prohibited by the Act, There Ccm
Be No Holding That the Provisions Are Invalid.
The amendment to the Boston milk order effective August
1, 1941, providing for payments to co-operatives, contains
a finding of fact by the Secretary, on the basis of the amend¬
ment hearing, that the provisions of the order for co-opera¬
tive payments are necessary to the effectuation of the classi¬
fication, pricing, and pooling provisions in the order. These
provisions of the order were amended again effective August
1, 1947, and the finding by the Secretary is that each of the
provisions in the amendment is necessary in order to effect¬
uate the declared purpose of the Act. The appellees’ brief
suggests (appellees’ brief, p. 36) that the amendments ef¬
fective August 1, 1947, provide for only a few procedural
or trivial changes in the order and that, therefore, no
significance should be attached to the failure to include the
hearing record on which those amendments were based as
a part of the record in this litigation.
The notice of the hearing on which the 1947 amendments
were based refutes the appellees’ contentions that only in¬
consequential aspects of the co-operative payment provi¬
sions were dealt with at the hearing. The notice of hearing
(11 F.R. 640, 643-644) sets forth seven proposals with
respect to payments to co-operatives. Some of those pro¬
posals deal with changes in the rates of payment, but
one of the proposals is to delete all of the provisions of the
30
order for payments to co-operatives, and another proposal
is to reconsider, in all respects, the co-operative payment
provisions of the order. The issues created by these pro¬
posals, on which that hearing was held, were strongly con¬
tested and thoroughly considered at the public hearing held
in Febraarv and March 1946. The evidence adduced at the '
hearing with respect to the issues relative to co-operative
payments is found in 472 pages of testimony and 33 ex¬
hibits. 18 On the basis of the evidence adduced at that hear¬
ing, the Secretary issued an amendment (12 F.R. 4921)
which completely revised the co-operative payment pro¬
visions of the order. 19
The findings of the Secretary on the basis of the evidence
at a public hearing carry a presumption of the existence
of a state of facts justifying the action. United States v.
Rock Royal , Inc., 307 U.S. 533, 567-568; Thompson v. Con¬
solidated Gas Utilities Corporation , 300 U.S. 55, 69; Wallace
v. Hudson-Duncan & Compamy (C. A. 9), 98 F. 2d 985; and
Qucensboro Farms Products v. Wickard (C. A. 2), 137 F.
2d 969, 977-9S1. The administrative interpretation of the
Act is entitled to great weight, and: “This is peculiarly
true here where the interpretations involve ‘contempora¬
neous construction of a statute by the men charged with
the responsibility of setting its machinery in motion, of
18 The transcript of the record of this hearing is a public record
in the Office of the Hearing Clerk, U. S. Department of Agriculture,
Washington, D. C., and is identified as Docket No. AO-14-A12,
and the evidence with respect to co-operative payments is found
in pp. 1621-2,093.
19 The original provision for the payment of 1.5 cents per hundred¬
weight on all milk marketed by a qualified co-operative on behalf
of its members was changed to 1 cent per hundredweight on such
milk as its members delivered to handlers other than a qualified
co-operative. The original payment of 5 cents per hundredweight
to co-operatives operating their own plants for milk received from
producers at such plants and sold as Class I milk to proprietary
handlers was changed to a payment of 2 cents per hundredweight
on milk received from producers at plants operated by qualified
co-operatives. Many other changes were also effectuated in the
provisions of the order dealing with payments to co-operatives.
These changes are discussed in the report which was published in
the Federal Register (12 F.R. 1169) on February 20, 1947.
I
31
making the parts work efficiently and smoothly while- they
are yet untried and new.’ ” United States v. American
Trucking Association, 310 U.S. 534, 549. See also Cardillo
v. Liberty Mutual Insurance Company, 330 U.S. 469, 477;
Unemployment Compensation Commission v. Aragon, 329
U. S. 143, 153-154; Roland Electrical Company v. Walling,
326 U. S. 657,676; National Labor Relations Board v. Hearst
Publications, Inc., 322 U.S. Ill, 131; and Colgate Company
v. United States, 320 U.S. 422, 426. Any such interpretation
will not ‘ ‘ be overturned unless clearly wrong, or unless a dif¬
ferent construction is plainly required.” United States v.
Jackson, 280 U.S. 183,193. Moreover, the rule that a special¬
ized agency’s findings on a question within its specialty “are
not to be disturbed except in the plainest case • • •
applies here with a special force just because the findings
are necessarily prospective; time alone [could] decide their
success or their failure.” Philadelphia Company v. Securi¬
ties and Exchange Commission, App. D.C. , 177 F. 2d
720, 724.
The hearing record on which the 1947 amendments are
based is not before the Court. The appellees failed to sub¬
mit that hearing record in this proceeding in the District
Court. That forecloses any question as to the validity of
these provisions in the Boston milk order. Shields v. Utah
Idaho Central R. Co., 305 U.S. 177.
CONCLUSION
For the foregoing reasons the judgment of the lower court
should be reversed and the amended complaint should be
dismissed.
J. Stephen Doyle, Jr.,
Neil Brooks,
Special Assistants to the Attorney General .
Lewis A. Sigler,
Assistant Associate Solicitor.
Mary Connor Myers,
Attorney, U. S. Department of
Agriculture.
32
APPENDIX
The following are relevant sections of the Agricultural
Marketing Agreement Act of 1937 (7 U.S.C. 601 et seq.):
§ 60Sc. Orders Regulating Handling of Commodity.
(1) Issuance by Secretary.
Sec. 8c. (1) The Secretary of Agriculture shall, subject
to the provisions of this section, issue, and from time to
time amend, orders applicable to processors, associations
of producers, and others engaged in the handling of any
agricultural commodity or product thereof specified in sub¬
section (2) of this section. Such orders shall regulate, in
the manner hereinafter in this section provided, only such
handling of such agricultural commodity, or product
thereof, as is in the current of interstate or foreign com¬
merce, or which directly burdens, obstructs, or affects, inter¬
state or foreign commerce in such commodity or product
thereof.
• •••«••
(3) Notice and Hearing.
(3) Whenever the Secretary of Agriculture has reason to
believe that the issuance of an order will tend to effectuate
the declared policy of this title with respect to any com¬
modity or product thereof specified in subsection (2) of
this section, he shall give due notice of and an opportunity
for a hearing upon a proposed order.
(4) Finding and Issuance of Order.
(4) After such notice and opportunity for hearing, the
Secretary of Agriculture shall issue an order if he finds,
and sets forth in such order, upon the evidence introduced
at such hearing (in addition to such other findings as may
be specifically required by this section) that the issuance
of such order and all of the terms and conditions thereof
will tend to effectuate the declared policy of this title with
respect to such commodity.
(5) Milk and Its Products; Terms and Conditions of Orders
(5) In the case of milk and its products, orders issued
pursuant to this section shall contain one or more of the
following terms and conditions, and (except as provided in
subsection (7)) no others:
(A) Classifying milk in accordance with the form in
which or the purpose for which it is used, and fixing, or pro-
33
viding a method for fixing, minimum prices for each such
use classification which all handlers shall pay, and the time
when payments shall be made, for milk purchased from
producers or associations of producers. Such prices shall
be uniform as to all handlers, subject only to adjustments
for (1) volume, market, and production differentials cus¬
tomarily applied by the handlers subject to such order,
(2) the grade or quality of the milk purchased, and (3)
the locations at which delivery of such milk, or any use
classification thereof, is made to such handlers.
(B) Providing:
(i) for the payment to all producers and associa¬
tions of producers delivering milk to the same handler
of uniform prices for all milk delivered by them: Pro¬
vided, That, except in the case of orders covering milk
products only, such provision is approved or favored
by at least three-fourths of the producers who, during
a representative period determined by the Secretary
of Agriculture, have been engaged in the production
for market of milk covered in such order or by pro¬
ducers who, during such representative period, have
produced at least three-fourths of the volume of such
milk produced for market during such period; the
approval required hereunder shall be separate and
apart from any other approval or disapproval provided
for by this section; or
(ii) for the payment to all producers and associa¬
tions of producers delivering milk to all handlers of
uniform prices for all milk so delivered, irrespec¬
tive of the uses fnade of such milk by the individual
handler to whom it is delivered;
subject, in either case, only to adjustments for (a) volume,
market, and production differentials customarily applied
by the handlers subject to such order, (b) the grade or
quality of the milk delivered, (c) the locations at which
delivery of such milk is made, and (d) a further adjust¬
ment, equitably to apportion the total value of the milk pur¬
chased bv any handler, or by all handlers, among producers
and associations of producers, on the basis of their mar¬
ketings of milk during a representative period of time.
(C) In order to accomplish the purposes set forth in
paragraphs (A) and (B) of this subsection (5), provid¬
ing a method for making adjustments in payments, as among
34
handlers (including producers who are also handlers), to
the end that the total sums paid by each handler shall equal
the value of the milk purchased by him at the prices fixed
in accordance with paragraph (A) hereof.
(D) Providing that, in the case of all milk purchased by
handlers from any producer who did not regularly sell milk
during a period of 30 days next preceding the effective date
of such order for consumption in the area covered thereby,
payments to such producer, for the period beginning with
the first regular delivery by such producer and continuing
until the end of two full calendar months following the
first day of the next succeeding calendar month, shall be
made at the price for the lowest use classification specified
in such order, subject to the adjustments specified in para¬
graph (B) of this subsection (5).
(E) Providing (i) except as to producers for whom such
services are being rendered by a cooperative marketing
association, qualified as provided in paragraph (F) of this
subsection (5), for market information to producers and
for the verification of weights, sampling, and testing of
milk purchased from producers, and for making appro¬
priate deductions therefor from payments to producers,
and (ii) for assurance of, and security for, the payment by
handlers for milk purchased.
(F) Nothing contained in this subsection (5) is intended
or shall be construed to prevent a cooperative marketing
association qualified under the provisions of the Act of
Congress of February 18, 1922, as amended, known as the
“Capper-Volstead Act,” engaged in making collective sales
or marketing of milk or its products for the producers
thereof, from blending the net proceeds of all its sales in
all markets in all use classifications, and making distribu¬
tion thereof to its producers in accordance with the contract
between the association and its producers: Provided, That
it shall not sell milk or its products to any handler for use
or consumption in any market at prices less than the prices
fixed pursuant to paragraph (A) of this subsection (5)
for such milk.
(G) No marketing agreement or order applicable to milk
and its products in any marketing area shall prohibit or in
any manner limit, in the case of the products of milk, the
marketing in that area of any milk or product thereof
produced in any production area in the United States.
• ••••••
35
(7) Terms Common to All Orders.
(7) In the case of the agricultural commodities and the
products thereof specified in subsection (2) orders shall
contain one or more of the following terms and conditions:
(A) Prohibiting unfair methods of competition and un¬
fair trade practices in the handling thereof.
(B) Providing that (except for milk and cream to be sold
for consumption in fluid form) such commodity or product
thereof, or any grade, size, or quality thereof shall be sold
by the handlers thereof only at prices filed by such handlers
in the manner provided in such order.
(C) Providing for the selection by the Secretary of Agri¬
culture, or a method for the selection, of an agency or agen¬
cies and defining their power and duties, which shall include
only the powers:
(i) To administer such order in accordance with its
terms and provisions;
(ii) To make rules and regulations to effectuate the
terms and provisions of such order;
(iii) To receive, investigate, and report to the Secre¬
tary of Agriculture complaints of violations of such
order; and
(iv) To recommend to the Secretary of Agriculture
amendments to such order.
No person acting as a member of an agency established pur¬
suant to this paragraph (C) shall be deemed to be acting in
an official capacity, within the meaning of section 10 (g)
of this title, unless such person receives compensation for
his personal services from funds of the United States.
(D) Incidental to, and not inconsistent with, the terms
and conditions specified in subsections (5), (6), and (7) and
necessary to effectuate the other provisions of such order.
• ••••••
§ 610. Administration Generally.
Sec. 10(b)(2). Each order relating to milk and its
products issued by the Secretary under this title shall pro¬
vide that each handler subject thereto shall pay to any
authority or agency established under such order such
handler’s pro rata share (as approved by the Secretary)
36
of such expenses as the Secretary may find will necessarily
be incurred by such authority or agency, during any period
specified by him, for the maintenance and functioning of
such authority or agency, other than expenses incurred in
receiving, handling, holding, or disposing of any quantity of
milk or products thereof received, handled, held, or dis¬
posed of by such authority or agency for the benefit or
account of persons other than handlers subject to such order.
The pro rata share of the expenses payable by a coopera¬
tive association of producers shall be computed on the
basis of the quantity of milk or product thereof covered by
such order which is distributed, processed, or shipped by
such cooperative association of producers.
In issuing the amended order effective August 1, 1941,
the Secretarv made the following findings of fact (6 F. R.
3762, 7 CFR,' 1941 Supp., §904.0):
“(a) The Secretary finds, upon the evidence intro¬
duced at the hearings, said findings being in addition
to the findings made upon the evidence introduced at
the original hearings on this order, and on amendments
to said order, and being in addition to the other findings
and determinations made prior to or at the time of the
original issuance of said order and of amendments
thereto (which findings are hereby ratified and affirmed
save only as such findings are in conflict with the find¬
ings hereinafter set forth) ; •
“ (3) That the provisions relating to the payments out
of the equalization pool to cooperative associations per¬
forming certain marketing services are incidental to,
not inconsistent with, the other provisions of this order,
as amended, and necessary to effectuate the other provi¬
sions of the order, as amended; * * #
“(6) That the issuance of this order, as amended,
and all of its terms and conditions will tend to effectuate
the declared policy of the act * #
In issuing the amended order effective August 1, 1947,
the Secretary made the following findings of fact (12 F. R.
4921, 7 CFR, 1941 Supp., 904—Appendix):
“(a) Findings * * * upon the basis of the evi¬
dence introduced at such hearings and the record
thereof, it is found that:
(1) The said order, as amended, and as hereby fur¬
ther amended, and all of the terms and conditions of
37
said order, as amended and as hereby further amended,
will tend to effectuate the declared policy of the
act; # # *
“The foregoing findings are supplementary and in addi¬
tion to the findings made in connection with the issuance of
the aforesaid order and the findings made in connection with
the issuance of each of the previously issued amendments
thereto; and all of said previous findings are hereby ratified
and affirmed except insofar as such findings may be in con¬
flict with the findings set forth herein.”
The following are relevant sections of the Boston milk
marketing order, as amended (12 F.R. 4921, 7 CFR, 1947
Supp., 904.0 et seq.):
§ 904.8 Minimum blended prices to producers —(a) Com¬
putation of value of milk received from producers. For
each month, the market administrator shall compute the
value of milk received from producers which is sold, dis¬
tributed, or used by each pool handler, in the following
manner:
(1) Multiply the quantity of milk in each class by the
price applicable pursuant to § 904.7 (a) and (b);
(2) Add together the resulting value of each class; and
(3) Adjust the value determined in subparagraph (2) of
this paragraph as provided in § 904.7 (d).
(b) Computation of the basic blended price. The market
administrator shall compute the basic blended price per
hundredweight of milk delivered during each month in the
following manner:
(1) Combine into one total the respective values of milk,
computed pursuant to paragraph (a) of this section, for each
pool handler from whom the market administrator has re¬
ceived at his office, prior to the 11th day after the end of
such month, the report for such month and the payments
required pursuant to § 904.9 (b)(2) and (g) for milk re¬
ceived during each month since the effective date of the most
recent amendment of this part;
(2) Add the total amount of payments required from
handlers pursuant to § 904.9 (g);
(3) Add the amount of unreserved cash on hand at the
close of business on the 10th day after the end of the month
from payments made to the market administrator by han¬
dlers pursuant to § 904.9;
(4) Deduct the amount of the plus differentials, and add
the amount of the minus differentials, which are appli¬
cable pursuant to § 904.9 (e);
38
(5) Subtract the total amount of co-operative payments
required by § 904.10 (b);
(6) Divide by the total quantity of milk for which a value
is determined pursuant to subparagraph (1) of this para¬
graph ; and
(7) Subtract not less than 4 cents nor more than 5 cents
for the purpose of retaining a cash balance in connection
with the payments set forth in § 904.9. This result shall be
known as the basic blended price for milk containing 3.7
percent butterfat.
(c) Announcement of blended prices. On the 12th day
after the end of each month the market administrator shall
mail to all pool handlers and shall publicly announce:
(1) Such of these computations as do not disclose in¬
formation confidential pursuant to the act;
(2) The zone blended prices per hundredweight resulting
from adjustment of the basic blended price by the differen¬
tials pursuant to § 904.9 (e); and
(3) The names of the pool handlers, designating those
whose milk is not included in the computations.
§ 904.9 Payments for milk —(a) Advance payments. On
or before the 10th day after the end of each month, each
pool handler shall make payment to producers for the ap¬
proximate value of milk received during the first 15 days
of such month. In no event shall such advance payment
be at a rate less than the Class II price for such month.
The provisions of this paragraph shall not apply to any
handler who, on or before the 17th day after the end of the
month, makes final payment as required by subparagraph
(1) of paragraph (b) of this section.
(b) Final payments. On or before the 25th day after the
end of each month, each pool handler shall make payment
for the total value of milk received during such month as
required to be computed pursuant to § 904.8 (a), as follows:
(1) To each producer at not less than the basic blended
price per hundredweight, subject to the differentials pro¬
vided in paragraphs (d) and (e) of this section, for the
quantitv of milk delivered by such producer; and
(2) To producers, through the market administrator, by
paying to, on or before the 23d day after the end of each
month, or receiving from the market administrator, on or
before the 25th day after the end of each month, as the case
may be, the amount by which the payments required to be
made pursuant to subparagraph (1) of this paragraph are
less than or exceed the value of milk as required to be com¬
puted for such handler pursuant to $ 904.8 (a), as shown
39
in a statement rendered by the market administrator on or
before the 20th day after the end of such month.
(c) Adjustments of errors in payments . Whenever veri¬
fication by the market administrator of reports or payments
of any handler discloses errors made in payments pursuant
to subparagraph (2) of paragraph (b) of this section, the
market administrator shall promptly bill such handler for
any unpaid amount and such handler shall, within 15 days,
make payment to the market administrator of the amount
so billed. Whenever verification discloses that payment
is payable by the market administrator to any handler, the
market administrator shall, within 15 days, make such pay¬
ment to such handler. Whenever verification by the market
administrator of the payment to any producer for milk
delivered to any handler discloses payment to such pro¬
ducer of an amount less than is required by this section, the
handler shall make up such payment to the producer not
later than the time of making final payment for the month in
which such error is disclosed.
(d) Butterfat differential. Each pool handler shall, in
making the payments to each producer for milk received
from him, add for each one-tenth of 1 percent of average
butterfat content above 3.7 percent or deduct for each one-
tenth of 1 percent of average butterfat content below 3.7
per cent an amount per hundredweight which shall be cal¬
culated by the market administrator as follows: divide by
33.48 the weighted average price per 40-quart can of 40
percent bottling quality cream, f. o. b. Boston, as reported
bv the United States Department of Agriculture for the
period between the 16th day of the preceding month and the
15th day inclusive of the month during which such milk is
delivered, subtract 1.5 cents, and divide the result by 10:
Provided, That if no such cream price is reported, multiply
the average price reported for such period by the United
States Department of Agriculture for U. S. Grade A (U. S.
92-score) butter at wholesale in the Chicago market by 1.4,
subtract 1.5 cents, and divide the result by 10.
(e) Location differentials. The payments to be made to
producers by handlers pursuant to subparagraph (1) of
paragraph (b) of this section shall be subject to the differ¬
entials set forth in Column B of the table in $ 904.7 (c), and
to further differentials as follows:
(1) With respect to milk delivered by a producer whose
farm is located more than 40 miles but not more than 80
miles from the State House in Boston, there shall be added
40
23 cents per hundredweight, unless such addition gives a
result greater than the Class I price pursuant to § 904.7 (a)
and (c) which is effective at the plant to which such milk is
delivered, in which event there shall be added an amount
which will give as a result such price.
(2) 'With respect to milk delivered by a producer whose
farm is located not more than 40 miles from the State House
in Boston, there shall be added 46 cents per hundredweight,
unless such addition gives a result greater than the Class
I price pursuant to §904.7 (a) and (c) which is effective
at the plant to which such milk is delivered, in which event
there shall be added an amount which will give as a result
such price.
(f) Other differentials. In making the payments to pro¬
ducers set forth in subparagraph (1) of paragraph (b) of
this section, pool handlers may make deductions as follows:
(1) With respect to milk delivered by producers to a
city plant which is located outside the marketing area and
more than 14 miles from the State House in Boston, 10
cents per hundredweight;
(2) With respect to milk delivered by producers to a
country plant, at which plant the average daily receipts of
milk from producers are:
(i) Less than 17,000 but greater than 8,500 pounds, 4
cents per hundredweight; and
(ii) 8,500 pounds or less, 8 cents per hundredweight.
• ••••••
§ 904.10 Payment to cooperative associations —(a) Appli¬
cation and qualification for cooperative payments. Any
cooperative association of producers duly organized under
the laws of any state may apply to the Secretary for a deter¬
mination that it is qualified to receive cooperative payments
in accordance with the provisions of this section. Upon
notice of the filing of such an application, the market admin¬
istrator shall set aside for each month, from the funds pro¬
vided by handlers’ payments to the market administrator
pursuant to § 904.9, such amount as he estimates is ample
to make payment to the applicant, and hold it in reserve
until the Secretary has ruled upon the application. The
applicant association shall be considered to be a qualified
association entitled to receive such payments from the
date fixed by the Secretary, if he determines that it meets
all of the following requirements.
41
(1) It conforms to the requirements relating to charac¬
ter of organization, voting, dividend payments, and dealing
in products of nonmembers, which are set forth in the
Capper-Volstead Act and in the state laws under which the
association is organized.
(2) It operates as a responsible producer-controlled
marketing association exercising full authority in the sale
of the milk of its members.
(3) It systematically checks the weights and tests of milk
which its members deliver to plants not operated by the
association.
(4) It guarantees payment to its members for milk deliv¬
ered to plants not operated by the association.
(5) It maintains, either individually or together with
other qualified associations, a competent staff for dealing
with marketing problems and for providing information to
its members.
(6) It constantly maintains close working relationships
with its members.
(7) It collaborates with similar associations in activities
incident to the maintenance and strengthening of collective
bargaining by producers and the operation of a plan of uni¬
form pricing of milk to handlers.
(8) It is in compliance with all applicable provisions of
this order.
(b) Cooperative Payments. On or before the 25th day
after the end of each month, each qualified association shall
be entitled to receive a cooperative payment from the funds
provided by handlers’ payments to the market administra¬
tor pursuant to § 904.9. The payment shall be made under
the conditions and at the rates specified in this paragraph,
and shall be subject to verification of the receipts and other
items upon which such payment is based.
(1) Each qualified association shall be entitled to pay¬
ment at the rate of 1 cent per hundredweight on the milk
which its producer members deliver to the plant of a hand¬
ler other than a qualified association; except on milk deliv¬
ered by a producer who is also a member of another quali¬
fied association, and on milk delivered to a handler who
fails to make applicable payments pursuant to § 904.9 (b)(2)
and § 904.11 within 10 days after the end of the month in
which he is required to do so. If the handler is required
by paragraph (e) of this section to make deductions from
members of the association at a rate lower than 1 cent per
42
hundredweight, the payment pursuant to this subparagraph
shall be at such lower rate.
(2) Each qualified association shall be entitled to pay¬
ment at the rate of 2 cents per hundredweight on milk re¬
ceived from producers at a plant operated by that associa¬
tion.
(c) Reports relating to cooperative payments. Each
qualified association shall, upon request by the market
administrator, make reports to him with respect to its use
of cooperative payments and its performance in meeting the
requirements set forth as the basis for such payments, and
shall file with him a copy of its balance sheet and operating
statement at the close of each fiscal year.
(d) Suspension of cooperative payments. Whenever
there is reason to believe that an association is no longer
meeting the qualification requirements, the market admin¬
istrator shall, upon request by the Secretary, suspend co¬
operative payments to it, and shall give the association writ¬
ten notice of the suspension. Such suspended payments
shall be held in reserve until the Secretary has, after notice
and opportunity for a hearing, ruled upon the performance
of the association.
(e) Deductions from payments to members. (1) Each
association which is entitled to receive cooperative pay¬
ments on milk which its producer members deliver to a
handler other than a qualified association may file a claim
with the handler for amounts to be deducted from the hand¬
ler’s payments to such members. The claim shall contain
a list of the producers, an agreement to indemnify the hand¬
ler in the making of the deductions, and a certification that
the association has an unterminated membership contract
with each producer, authorizing the claimed deduction.
(2) In making payments to his producers for milk re¬
ceived during the month, each handler shall make deduc¬
tions in accordance with the association’s claim, and shall
pay the amount deducted to the association within 25 days
after the end of the month.
☆ U. S. tOVKHNNINT miNTIMC OFFICC; 1*10
■71741
Ilf
Nos. 10,365, 10,366
REPLY BRIEF FOR APPELLANT
DAIRYMEN’S LEAGUE CO-OPERATIVE
ASSOCIATION, INC.
In The
Hniteit States ffimtrt of Appeals
Fob the Distbict of Columbia Circuit
C~ y - -
-V
No. 10,365 '
Chables F. Bbannan, Secretary of Agriculture,
Appellant,
v.
Delbebt 0. Stabk, et al..
Appellees.
No. 10,366
Dairymen’s League Co-Operative Association, Inc.,
Appellant,
v.
Delbebt 0. Stabk, et al..
Appellees.
On Appeal from the Judgment of the United States
District Court for the District of Columbia
Seward A. Miller
Frank B. Lent
New York City
Attorneys for Appellant,
Dairymens League Cooper¬
ative Association, Inc.
Of Counsel
Wm. E. Leahy
War. J. Hughes, Jb.
Bowen Building
Washington, D. C.
Wilson - Epes Pointing Co. - RE 6003 - Washington 1. D. C.
INDEX
PAGE
A. Appellees Have Confused Methods of Fixing
Prices to Handlers and Payments to Producers.... 1
B. The Present Deductions Are Not the Only Deduc¬
tions Made from the Producers Generally. 3
C. The Cooperative Producers Bear the Majority Ex¬
pense of the Deduction.. 3
D. Affidavits Showing Market-Wide Services Were
Properly Before the Court Below. 4
E. Findings of the Secretary; “Order’’ and “Act”.. 4
F. Alleged Omission of Sec. 10(b) (1) in 1937 Act.... 5
G. Prices to Handlers. 5
H. Discrimination Against Handlers.... 5
I. Plaintiffs’ Right to Sue. 6
J. Provisions for Deductions in New York Statutes.. 6
K. Other Orders Providing Deductions. 8
In The
Imteii States fflnart of Appeala
For the District of Columbia Circuit
Nos. 10,365 and 10,366
Charles F. Brannan, Secretary of Agriculture,
Appellant,
v.
Delbert 0. Stark, et al..
Appellees.
No. 10,366
Dairymen's League Co-Operative Association, Inc.,
Appellant,
v.
Delbert 0. Stark, et al..
Appellees.
On Appeal from the Judgment of the United States
District Court for the District of Columbia
REPLY BRIEF FOR APPELLANT
DAIRYMEN’S LEAGUE CO-OPERATIVE
ASSOCIATION, INC.
A. Appellees Have Confused Methods of Fixing Prices
to Handlers and Payments to Producers:
In their Brief, p. 24-26, Appellees apparently misunder¬
stand the provisions of Order 4 as to fixing prices to han¬
dlers, basic blended prices, and payments to producers.
They treat the last two steps as one, and ignore the real
difference between them.
2
In the first place, the prices to the handlers are those
fixed in §904.7 of the 1947 Order and 904.4 of the 1941
Order. In the New York Order of April 1, 1949, there
is even a separate subdivision for this entitled “Net
Pool Obligation of Handlers.” (§927.7 (a)).
After the total value of all milk is obtained from the
dealer’s report, a uniform price to producers is obtained
under §904.7 of the 1941 Order and 907.8 of the 1947
Order. The latter section is headed “Minimum Blended
Prices to Producers”, and the result obtained after de¬
ductions not only of payments to cooperatives, but also
for reserves, is termed “Basic Blended Price’’ (§904.8 (b)
(7) of the 1947 Order). Then the provisions for pay¬
ment to the individual producers are set forth in §904.9 of
the 1947 Order and 904.8 of the 1941 Order. Thus we
have a distinction between deductions which affect the
basic blended price and those which affect individual pro¬
ducers, the latter taking into consideration the adjust¬
ments for butterfat, location, etc. which are specifically
mentioned in §8c (5) (B) (ii) of the Act. However, and
this is important, the adjustments as to “Basic Blended
Price” are not referred to in the Act except that the price
to be paid producers shall be uniform, regardless of the
uses made bv the handlers to whom the milk was deliv¬
ered. Appellee’s fully ignore the distinction as to “Basic
blended price”. See page 24 of their brief. The basic
blended price is the Administrator’s blended price. The
next section of the Order provides for payments to pro¬
ducers which are to be made by the handlers, as distin¬
guished from the determination of the price by the Ad¬
ministrator. Thus, the handlers make the deductions re¬
ferred to in the last part of Section 8c (5) (B) (ii) of the
Act. Naturally the payments by the handlers to the pro¬
ducers must be safeguarded. Therefore, the word “only”
is used in the text of the Act, but it applies to these pay¬
ments, and not to the price determination by the Adminis-
3
trator. This is shown by the wording of the text in that
it refers to adjustments customarily applied by the han¬
dlers.
B. The Present Deductions Are Not the Only Deductions
Made From the Producers Generally:
The Appellees imply that the deductions for payments
to cooperative associations are the only deductions made
under the Boston Order from the producers generally.
Apparently the trial court accepted this claim. The claim
is contrary to the facts. Sections 904.7 (7) and (8) of
the 1941 Order and 904.8 (3) and (7) of the 1947 Order
specifically provide, in addition to the provisions for co¬
operative payments, for additions to and deductions from
the blending fund for a reserve fund. The basis of these
reserves is to furnish the Administrator with a capital
fund to take care of delayed payments by handlers, audited
adjustments, and improper classification reports. With¬
out such capital the blends would necessarily be determined
by the exact amount due from all handlers regardless of
payment, but funds would not be available for making the
required payments and the blend would break down. The
producers may never receive the full amount thus de¬
ducted as in the case of a bankrupt handler. Thus, these
reserve deductions, made from the basic blended price
exactly as cooperative deductions, are on the same legal
basis as the latter. It seems clear that if one is invalid,
the other is. There is no intention here to object to these
reserve deductions, and Appellees have at no time in this
case made objection to, and thereby they accept, a deduc¬
tion similar to that to which they object herein.
C. The Cooperative Producers Bear the Majority Expense
of the Deduction:
Appellees in their Brief, p. 17, stress the burden of a
quarter of the million dollars annually due to deductions
for payments to cooperatives. However, it should be borne
4
in mind that a computation from the table set forth on p.
250 of the Joint App. shows that approximately 68.6 per
cent of deliveries of milk were made by producers of co¬
operatives, and thus approximately $171,500. of the quar¬
ter million dollars is actually borne by such producers.
D. Affidavits Showing Market-Wide Services Were Prop¬
erly Before the Court Below:
On page 8 of their brief, Appellees apparently claim
that the proceedings on the Motion for Summary Judg¬
ment are not material in this case and hence affidavits as
to market-wide services cannot be availed of here. It is
an established rule that an appeal from the final judgment
in equity case brings up all interlocutory matters.
Victor Talking Mach. Co. v. George, 105 F. 2nd,
697,699.
Western Union. T. Co. v. U. S. & M. T. Co., 221 Fed.,
545,551.
E. Findings of the Secretary; “Order" and “Act":
Appellees, in a footnote on page 29, question the findings
of the Secretary. They cite only finding No. 3 in the
1941 Order and omit finding No. 6, which was as follows:
“6. That the issuance of the Order, as amended, and
all of its terms and conditions, will tend to effectuate
the declared policy of the Act."
Again, in the 1947 Order, finding (3) ratifies the findings
in previous Orders, and finding (1) states that the terms
and conditions of the Order as amended will tend to ef¬
fectuate the declared policy of the Act, and also determi¬
nation (2) is as follows:
“2. The issuance of this amended Order is the only
practical means, pursuant to the declared policy of
the Act, of advancing the interests of producers of
milk which is produced for sale in the said marketing
area;"
5
F. Alleged Omission of Sec. 10(b)(1) in 1937 Act:
See footnote p. 31. While it is true that §10 (b) (1)
of the 1935 Act was not expressly re-enacted in 1937, the
latter Act in §5 expressly retained this provision, and the
Court in the Rock Royal case, 307 U. S., 533, 563, ex¬
pressly held the provisions to be applicable.
G. Prices to Handlers:
On p. 26 Appellees refer to the provisions of the Act
(§8c (5) (C)) as to prices to handlers. Their reasoning
is erroneous. This provision is to safe guard the policy
of the Act that the handlers pay only the fair value of
their milk under the various classes. In other words, he
should account to the Administrator and the producer on
the basis of class value, that is, of fluid milk at one price
and of cream at another price, and butter or cheese at
another. This is in line with the idea of a classified price
system, and has no real reference to the determination of
the basic blended price.
It is also true that the Administrator is a trustee for
the producers, and the payments to producers are paid
to them, through him, under the terms of the Order. This
may be illustrated by the case of dealer A, who handles
only Class I milk and who pays the difference between
such Class I price and the basic blend price to the Ad¬
ministrator, and of dealer B, whose milk is used largely
as Class II and w T ho receives money from the Administra¬
tor so that he can pay his producers, and both A and B
then pay the producers on the basis of the basic blended
price. Thus payment is made to a considerable extent
through the Administrator.
H. Discrimination Against Handlers:
The statement in Appellant’s brief, in the last sentence
of Point III on page 33, seems clearly inaccurate. There
was a colloquy in the Senate between Chairman Smith, of
6
the Committee, and Senator Borah, 79 Cong. Re. 1097-8,
and it would seem that the explanation was that the
stricken clause would actually discriminate against cooper¬
atives and prevent their being compensated for services
rendered. This is, of course, in line with the statement
by Asst. Secretary Davis, of the Department, set forth in
our original brief at page 26.
I. Plaintiffs’ Right to Sue:
The citations on page 37 of Appellant’s brief appar¬
ently do not justify the claim there presented. It may be
true that the intervenor cannot bring an entirely new
issue into the case, although it has broad rights (Rector
v. U. S., 20 F. 2nd, 845, 859). Here the Answer of the
main defendant in par. 2 (Joint App. 4S) specifically
brings into issue the right of the plaintiffs to maintain a
class action and to act for the benefit of all other persons
similarly situated. Therefore, the intervenor appellant’s
first point in its brief is a proper one. It is well known
that an intervenor can question—indeed, it is his duty to
question—the real jurisdiction of the Court. (2 Moore’s
Fed. Prac. y Sec. 2412, p. 2377).
In this connection a clear issue was raised as to the
maintenance of the action as a class one, and apparently
the trial judge did not pass on this question in either his
findings or conclusions.
Not only was there a heavy preponderance of votes of
non-cooperative producers in favor of the order, but also
witness Carten, (Joint App. 240), as a non-cooperative pro¬
ducer, endorsed the cooperative provisions as payment
for services to all producers.
J. Provisions for Deductions in New York Statutes:
The statement on page 30 of the Appellee’s brief as to
the New York Statutes is erroneous. As stated in our
original brief at pgs. 40 and 41, the 1937 Statute did pro-
7
vide for payments to co-operatives for marketing serv¬
ices. The wording was:
“Any marketing agreement or order of the Commis¬
sioner may provide for necessary deductions from pay¬
ments to producers to provide for marketing services
to them,...” Sec’t. 258-m.
There was also the following clause in the declaration
of policy (Sect. 258-k):
“. . . that it is the policy of this state to promote,
foster and encourage the intelligent and orderly mar¬
keting of milk through producer owned and controlled
co-operative associations,.. .**
Pursuant to the above, the provisions of New York Offi¬
cial Order 126 concurrent and identical in terms with Fed¬
eral Order No. 27 provided for deduction for payments
to co-operatives. The terms of the Federal Order are set
forth in footnote 14 in United States v. Rock Royal , 307
U. S. 533, 551. Also pursuant to State legislation, the
State issued Official Order 127 regulating handling of
milk in the Niagara-Frontier Marketing Area (Buffalo)
providing for payments to co-operatives, the qualifications
therefore being in the same language as in Art. VII, Sec. 5,
of Federal Order No. 27 and State Order 126. Both of
these orders issued in 1938 were ratified and confirmed
by the legislature in Sect. 3 of Chap. 760 of the laws of
1939. Although there have been subsequent amendments
as to the amount and basis of payments, these orders, at
present including Federal Order No. 27, are in essence
the same as the original. In addition. New York State
Official Order 128, issued November 1939, relating to the
Rochester Area, has incorporated the principles of the
Buffalo Order.
There was also in the original of these orders provisions
for deductions to be made to pay operators of country re¬
ceiving stations, whether operated by dealers or co-opera¬
tives, for shipments of surplus milk to manufacturing
8
plants as a service to the industry. These services were
separate and distinct from those for which co-operatives
were paid.
K. Other Orders Providing Deductions:
While the Order No. 4 was not specific as to handling
of surplus and supply of the market in times of shortage,
it did provide as to five cent payments (§904.9 (a) (2))
that it should apply only to milk sold to handlers, and also
providing in substance that it did not apply to sales in
lower classes if such sales were not available as Class I
to other handlers.
The New York Order No. 27 has been more specific, and
in §927.9 (f) provides as one of the conditions for pay¬
ments that a co-operative furnish milk in times of short
supply to the marketing area and utilize milk in times of
long supply in such manner as to secure the greatest pos¬
sible return to all producers.
The statement on page 32 of the Appellee’s brief as
only one instance of co-operative payments is erroneous.
Page 28 of our original brief cited the provision in the
Indiana law of 1935 and the license for the Twin Cities
area under the Federal Act in August, 1933, and on page
26 reference is made to the “check-off” in the Chicago
area. There was also a provision in Order No. 3 dated
January 30, 1936, affecting the St. Louis area (Sec. 5 of
Art. IX), for an extra payment by a handler to co-opera¬
tive associations for services to such handlers. This order
provided for a dealer blend instead of a market blend.
This order was ratified in Sec. 4 of the 1937 Act. See
House Report No. 468 March 24, 1939, p. 4. Thus there
were instances of at least four “check-offs” to be consid¬
ered in connection with the section as to co-operative en¬
couragement, and also in connection with the statement of
the Congressional Committees in substance that the provi-
9
sions of Sec. 8c of the Act embody the methods employed
by the co-operative associations. See pages 25 and 26
of original brief.
Respectfully submitted,
Seward A. Miller
Frank B. Lent
New York City
Attorneys for Appellant,
Dairymen's League Cooper¬
ative Association, Inc.
Wm. E. Leahy
Wm. J. Hughes, Jr.
Bowen Building
Washington, D. C.
Of Counsel
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